Mesenchymal stem cells (MSCs) represent a promising therapeutic approach for neurological autoimmune diseases; previous studies have shown that treatment with bone marrow-derived MSCs induces immune modulation and reduces disease severity in experimental autoimmune encephalomyelitis (EAE), an animal model of multiple sclerosis. Here we show that intravenous administration of adipose-derived MSCs (ASCs) before disease onset significantly reduces the severity of EAE by immune modulation and decreases spinal cord inflammation and demyelination. ASCs preferentially home into lymphoid organs but also migrates inside the central nervous system (CNS). Most importantly, administration of ASCs in chronic established EAE significantly ameliorates the disease course and reduces both demyelination and axonal loss, and induces a Th2-type cytokine shift in T cells. Interestingly, a relevant subset of ASCs expresses activated alpha 4 integrins and adheres to inflamed brain venules in intravital microscopy experiments. Bioluminescence imaging shows that alpha 4 integrins control ASC accumulation in inflamed CNS. Importantly, we found that ASC cultures produce basic fibroblast growth factor, brain-derived growth factor, and platelet-derived growth factor-AB. Moreover, ASC infiltration within demyelinated areas is accompanied by increased number of endogenous oligodendrocyte progenitors. In conclusion, we show that ASCs have clear therapeutic potential by a bimodal mechanism, by suppressing the autoimmune response in early phases of disease as well as by inducing local neuroregeneration by endogenous progenitors in animals with established disease. Overall, our data suggest that ASCs represent a valuable tool for stem cell-based therapy in chronic inflammatory diseases of the CNS.