Sphingosine-1-phosphate (S1P) is a bioactive sphingolipid that activates a family of G protein coupled-receptors (GPCRs) implicated in mammalian development, angiogenesis, immunity and tissue regeneration. S1P functions as a trophic factor for many cell types, including embryonic stem cells (ESCs). Sphingosine phosphate lyase (SPL) is an intracellular enzyme that catalyzes the irreversible degradation of S1P. We found SPL to be highly expressed in murine ESCs (mESCs). To investigate the role of SPL in mESC biology, we silenced SPL in mESCs via stable transfection with a lentiviral SPL-specific short hairpin RNA (shRNA) construct. SPL-knockdown (SPL-KD) mESCs showed a 5-fold increase in cellular S1P levels, increased proliferation rates and high expression of cell surface pluripotency markers SSEA1 and OCT4 compared to vector control cells. Compared to control mESCs, SPL-KD cells showed robust activation of STAT3 and a 10-fold increase in S1P2 expression. Inhibition of S1P2 or STAT3 reversed the proliferation and pluripotency phenotypes of SPL-KD mESCs. Further, inhibition of S1P2 attenuated, in a dose-dependent fashion, the high levels of OCT4 and STAT3 activation observed in SPL-KD mESCs. Finally, we showed that SPL-KD cells are capable of generating embryoid bodies from which muscle stem cells, called satellite cells, can be isolated. These findings demonstrate an important role for SPL in ESC homeostasis and suggest that SPL inhibition could facilitate ex vivo ESC expansion for therapeutic purposes.