Heparanase is an endo-beta-d-glucuronidase that cleaves heparan sulfate (HS) saccharide chains. The enzyme promotes cell adhesion, migration and invasion and plays a significant role in cancer metastasis, angiogenesis and inflammation. The present study focuses on the involvement of heparanase in autoimmunity, applying the murine experimental autoimmune encephalitis (EAE) model, a T-cell dependent disease often used to investigate the pathophysiology of multiple sclerosis (MS). Intraperitoneal administration of recombinant heparanase ameliorated, in a dose dependent manner, the clinical signs of the disease. In vitro and in vivo studies revealed that heparanase inhibited mitogen induced splenocyte proliferation and mixed lymphocyte reaction (MLR) through modulation of their repertoire of cytokines indicated by a marked increase in the levels of IL-4, IL-6 and IL-10, and a parallel decrease in IL-12 and TNF-alpha. Similar results were obtained with active, latent, or point mutated inactive heparanase, indicating that the observed inhibitory effect is attributed to a non-enzymatic activity of the heparanase protein. We suggest that heparanase induces upregulation of Th2 cytokines, resulting in inhibition of the inflammatory lesion of EAE.