Sphingosine-1-phosphate (S1P) is a bioactive sphingolipid that interacts via 5 G-protein coupled receptors, S1PR1-5, to regulate signalling pathways critical to biological processes including cell growth, immune cell trafficking, and inflammation.We demonstrate that in Type 2 diabetic (T2D) subjects, plasma S1P levels significantly increased in response to the anti-diabetic drug, rosiglitazone, and, S1P levels correlated positively with measures of improved glucose homeostasis. In HFD-induced obese C57BL/6 J mice S1PR3 gene expression was increased in adipose tissues (AT) and liver compared with low fat diet (LFD)-fed counterparts. On a HFD, weight gain was similar in both S1PR3-/- mice and WT littermates; however, HFD-fed S1PR3-/- mice exhibited a phenotype of partial lipodystrophy, exacerbated insulin resistance and glucose intolerance. This worsened metabolic phenotype of HFD-fed S1PR3-/- mice was mechanistically linked with increased adipose inflammation, adipose macrophage and T-cell accumulation, hepatic inflammation and hepatic steatosis. In 3T3-L1 preadipocytes S1P increased adipogenesis and S1P-S1PR3 signalling regulated the expression of PPARγ, suggesting a novel role for this signalling pathway in the adipogenic program. These results reveal an anti-diabetic role for S1P, and, that S1P-S1PR3 signalling in the adipose and liver defends against excessive inflammation and steatosis to maintain metabolic homeostasis at key regulatory pathways.