Steroid receptor coactivator-3 (SRC-3) has been demonstrated to regulate lipid metabolism by inhibiting adipocyte differentiation. In this study, the potential role of SRC-3 in experimental autoimmune encephalomyelitis (EAE), which characterized by inflammatory demyelination in central nervous system (CNS), was examined by analyzing disease progression in SRC-3-deficient (SRC-3(-/-)) mice. We found that SRC-3 deficiency significantly attenuated the disease severity of EAE along with decreased inflammatory infiltration and demyelination. However, these effects are not caused by inhibition of peripheral T cell response, but by upregulated expression of peroxisome proliferator-activated receptor (PPAR)-beta in CNS, which induced an alternative activation state of microglia in SRC-3(-/-) mice. These alternatively activated microglia inhibited CNS inflammation through inhibition of proinflammatory cytokines and chemokines, such as TNF-alpha, IFN-gamma, CCL2, CCL3, CCL5, and CXCL10, as well as upregulation of anti-inflammatory cytokine IL-10 and opsonins, such as C1qa and C1qb. Moreover, microglia alternative activation promoted myelin regeneration through increased accumulation of oligodendrocyte precursors in white matter and elevated expression of myelin genes in the spinal cords of SRC-3(-/-) mice. Our results build up a link between lipid metabolic regulation and immune functions, and the modulation of the expression of SRC-3 or PPAR-beta may hopefully has therapeutic modality in MS and possibly other neurodegenerative diseases.