Circulation of lymphocytes through peripheral lymphoid tissues as well as progenitor entry into the thymus and its output of mature T cells are critical for normal immune function. Egress of lymphocytes from both peripheral lymphoid organs and thymus is dependent on sphingosine 1-phosphate (S1P) gradients. S1P-lyase 1 (SGPL1) deficiency leads to accumulation of S1P in lymphoid tissues, which blocks lymphocyte egress and induces thymus atrophy. In this study, we investigated thymocyte development in SGPL1-deficient mice (SGPL1−/−), which exhibited postnatal discontinuation of early thymocytopoiesis starting at 2 wk after birth. SGPL−/− thymi showed a loss of developing thymocytes in the thymic cortex between 2 and 4 wk of age, whereas mature thymocytes accumulated in the medulla. Detailed analysis demonstrated a deficit in thymic early T cell progenitors (ETP) as the principal reason for discontinued thymocyte development. This developmental block was accompanied by accumulation of ceramides, resulting in enhanced apoptosis of developing T cells. Lack of immigration or settlement of ETP completely halted thymocyte development. We conclude that increased ceramide levels in the thymus of SGPL1−/− mice abrogate thymic development postnatally by enhanced thymocyte apoptosis and depletion of thymic ETP. Our findings indicate that potentially therapeutic immunosuppression by SGPL1 inhibition should benefit from monitoring ceramides to prevent their increase to apoptosis-inducing levels.