FTY720 (fingolimod) is an oral sphingosine-1 phosphate (S1P) receptor modulator in phase III development for the treatment of multiple sclerosis. To further investigate its mode of action, we analyzed gene expression in the central nervous system (CNS) during experimental autoimmune encephalomyelitis (EAE). FTY720 downregulated inflammatory genes in addition to vascular adhesion molecules. It decreased the matrix metalloproteinase gene MMP-9 and increased its counterregulator—tissue inhibitor of metalloproteinase, TIMP-1—resulting in a proteolytic balance that favors preservation of blood-brain-barrier (BBB) integrity. Furthermore, FTY720 reduced S1P lyase that increases the S1P concentration in the brain, in line with a marked reversal of neurological deficits and raising the possibility for enhanced triggering of S1P receptors on resident brain cells. This is accompanied by an increase in S1P1 and S1P5 in contrast with the attenuation of S1P3 and S1P4. Late-stage rescue therapy with FTY720, even up to 1 month after EAE onset, reversed BBB leakiness and reduced demyelination, along with normalization of neurologic function. Our results indicate rapid blockade of ongoing disease processes by FTY720, and structural restoration of the CNS parenchyma, which is likely caused by the inhibition of autoimmune T cell infiltration and direct modulation of microvascular and/or glial cells.