Regulatory T cells (Tregs) represent an important contributor to cancer immune escape, but the molecular mechanism responsible for Treg expansion in tumors is heterogeneous and unclear. Here, we investigated the role of S1P1, a receptor of the bioactive lipid sphingosine 1-phosphate (S1P), in regulating the crosstalk between tumor cells and tumor-associated Tregs in bladder cancer (BC). We found that the frequency of CD4+Foxp3+ Tregs was increased in circulating and tumor-infiltrating lymphocytes from BC patients. S1P1 expression was upregulated in BC tissues compared with tumor-adjacent tissues and was positively correlated with the density of tumor-infiltrated Foxp3+ Tregs. Both S1P1 and Treg predicted poor overall survival in BC patients. The in vitro data paralleled the in vivo data and suggested that the activation or overexpression of S1P1 in BC cells promoted the generation of BC-induced (i)Tregs from CD4+CD25-cells, and the generation of these cells was reversed by treatment with anti-IL-10 or anti-TGF-β. Moreover, S1P1 promoted Treg migration mediated by BC cells. Mechanistically, S1P1 activated the TGF-β signaling pathway, leading to the secretion of TGF-β and IL-10 from BC cells. In total, our findings suggest that S1P1 induces tumor-derived Treg expansion in a cell-specific manner and serves as a potent prognostic biomarker and therapeutic target in BC.