The sphingosine kinases (sphingosine kinase-1 and -2) have been implicated in a variety of physiological functions. Discerning their mechanism of action is complicated because in addition to producing the potent lipid second messenger sphingosine-1-phosphate, sphingosine kinases, both by producing sphingosine-1-phosphate and consuming sphingosine, have profound effects on sphingolipid metabolism. Sphingosine kinase-1 translocates to the plasma membrane upon agonist stimulation and this translocation is essential for the pro-oncogenic properties of this enzyme. Many of the enzymes of sphingolipid metabolism, including the enzymes that degrade sphingosine-1-phosphate, are membrane bound with restricted subcellular distributions. In the work described here we explore how subcellular localization of sphingosine kinase-1 affects the downstream metabolism of sphingosine-1-phosphate and the access of sphingosine kinase to its substrates. We find, surprisingly, that restricting sphingosine kinase to either the plasma membrane or the endoplasmic reticulum has a negligible effect on the rate of degradation of the sphingosine-1-phosphate that is produced. This suggests that sphingosine-1-phosphate is rapidly transported between membranes. However we also find that cytosolic or endoplasmic-reticulum targeted sphingosine kinase expressed at elevated levels produces extremely high levels of dihydrosphingosine-1-phosphate. Dihydrosphingosine is a proximal precursor in ceramide biosynthesis. Our data indicate that sphingosine kinase can divert substrate from the ceramide de novo synthesis pathway. However plasma membrane-restricted sphingosine kinase cannot access the pool of dihydrosphingosine. Therefore whereas sphingosine kinase localization does not affect downstream metabolism of sphingosine-1-phosphate, localization has an important effect on the pools of substrate to which this key signaling enzyme has access.