In many mammals, the eyelids migrate over the eye and fuse during embryogenesis to protect the cornea from damage during birth and early life. Loss-of-function mutations affecting the epidermal growth factor receptor (EGFR) signaling pathway cause an eyes-open-at-birth (EOB) phenotype in rodents. We identified an insertional mutation in Spinster homolog 2 (Spns2) in a strain of transgenic rats exhibiting the EOB phenotype. Spns2, a sphingosine 1-phosphate (S1P) transporter that releases S1P from cells, was enriched at the tip of developing eyelids in wild-type rat embryos. Spns2 expression or treatment with S1P or any one of several EGFR ligands rescued the EOB Spns2 mutant phenotype in vivo and in tissue explants in vitro and rescued the formation of stress fibers in primary keratinocytes from mutants. S1P signaled through the receptors S1PR1, S1PR2, and S1PR3 to activate extracellular signal–regulated kinase (ERK) and EGFR-dependent mitogen-activated protein kinase kinase kinase 1 (MEKK1)–c-Jun signaling. S1P also induced the nuclear translocation of the transcription factor MAL in a manner dependent on EGFR signaling. MAL and c-Jun stimulated the expression of the microRNAs miR-21 and miR-222, both of which target the metalloprotease inhibitor TIMP3, thus promoting metalloprotease activity. The metalloproteases ADAM10 and ADAM17 stimulated EGFR signaling by cleaving a membrane-anchored form of EGF to release the ligand. Our results outline a network by which S1P transactivates EGFR signaling through a complex mechanism involving feedback between several intra- and extracellular molecules to promote eyelid fusion in the developing rat.