FTY720 [2-amino-2-[2-(4-octylphenyl) ethyl]propane-1,3-diol hydrochloride] is an oral sphingosine-1-phosphate receptor modulator under development for the treatment of multiple sclerosis (MS). The drug is phosphorylated in vivo by sphingosine kinase 2 to its bioactive form, FTY720-P. Although treatment with FTY720 is accompanied by a reduction of the peripheral lymphocyte count, its efficacy in MS and experimental autoimmune encephalomyelitis (EAE) may be due to additional, direct effects in the central nervous system (CNS). We now show that FTY720 localizes to the CNS white matter, preferentially along myelin sheaths. Brain trough levels of FTY720 and FTY720-P in rat EAE are of the same magnitude and dose dependently increase; they are in the range of 40 to 540 ng/g in the brain tissue at efficacious doses and exceed blood concentrations severalfold. In a rat model of chronic EAE, prolonged treatment with 0.03 mg/kg was efficacious, but limiting the dosing period failed to prevent EAE despite a significant decrease in blood lymphocytes. FTY720 effectiveness is likely due to a culmination of mechanisms involving reduction of autoreactive T cells, neuroprotective influence of FTY720-P in the CNS, and inhibition of inflammatory mediators in the brain.