Globoid cell leukodystrophy (Krabbe disease) is a rare infantile neurodegenerative disorder. Krabbe disease is caused by deficiency in the lysosomal enzyme galactocerebrosidase (GALC) resulting in accumulation, in the micromolar range, of the toxic metabolite galactosylsphingosine ( psychosine) in the brain. Here we find that psychosine induces human astrocyte cell death probably via an apoptotic process in a concentration-and time-dependent manner (EC50∼15 μM at 4 h). We show these effects of psychosine are attenuated by pre-treatment with the sphingosine 1-phosphate receptor agonist pFTY720 (fingolimod) (IC50∼100 nM). Psychosine (1 μM, 10 μM) also enhances LPS-induced (EC50∼100 ng/ml) production of pro-inflammatory cytokines in mouse astrocytes, which is also attenuated by pFTY720 (1 μM). Most notably, for the first time, we show that psychosine, at a concentration found in the brains of patients with Krabbe disease (EC50∼100 nM), directly induces demyelination in mouse organotypic cerebellar slices in a manner that is independent of pro-inflammatory cytokine response and that pFTY720 (0.1 nM) significantly inhibits. These results support the idea that psychosine is a pathogenic agent in Krabbe disease and suggest that sphingosine 1-phosphate signalling could be a potential drug target for this disorder.