Many tumours originate from cancer stem cells (CSCs), which is a small population of cells that display stem cell properties. However, the molecular mechanisms that regulate CSC frequency remain poorly understood. Here, using microarray screening in aldehyde dehydrogenase (ALDH)-positive CSC model, we identify a fundamental role for a lipid mediator sphingosine-1-phosphate (S1P) in CSC expansion. Stimulation with S1P enhances ALDH-positive CSCs via S1P receptor 3 (S1PR3) and subsequent Notch activation. CSCs overexpressing sphingosine kinase 1 (SphK1), an S1P-producing enzyme, show increased ability to develop tumours in nude mice, compared with parent cells or CSCs. Tumorigenicity of CSCs overexpressing SphK1 is inhibited by S1PR3 knockdown or S1PR3 antagonist. Breast cancer patient-derived mammospheres contain SphK1(+)/ALDH1(+) cells or S1PR3(+)/ALDH1(+) cells. Our findings provide new insights into the lipid-mediated regulation of CSCs via Notch signalling, and rationale for targeting S1PR3 in cancer.