Abstract Sphingosine-1-phosphate (S1P) is a bioactive lipid molecule regulating organogenesis, angiogenesis, cell proliferation, and apoptosis. S1P is generated by sphingosine kinases (SPHK1 and SPHK2) through the phosphorylation of ceramide-derived sphingosine. Phenotypes caused by manipulating S1P metabolic enzymes and receptors suggested several possible functions for S1P in embryonic stem cells (ESCs), yet the mechanisms by which S1P and related sphingolipids act in ESCs are controversial. We designed a rigorous test to evaluate the requirement of S1P in murine ESCs by knocking out both Sphk1 and Sphk2 to create cells incapable of generating S1P. To accomplish this, we created lines mutant for Sphk2 and conditionally mutant (floxed) for Sphk1, allowing evaluation of ESCs that transition to double-null state. The Sphk1/2-null ESCs lack S1P and accumulate the precursor sphingosine. The double-mutant cells fail to grow due to a marked cell cycle arrest at G2/M. Mutant cells activate expression of telomere elongation factor genes Zscan4, Tcstv1, and Tcstv3 and display longer telomeric repeats. Adding exogenous S1P to the medium had no impact, but the cell cycle arrest is partially alleviated by the expression of a ceramide synthase 2, which converts excess sphingosine into ceramide. The results indicate that sphingosine kinase activity is essential in mouse ESCs for limiting the accumulation of sphingosine that otherwise drives cell cycle arrest.