HSV-1 is the leading cause of sporadic encephalitis in humans. HSV infection of susceptible 129S6 mice results in fatal encephalitis (HSE) caused by massive inflammatory brainstem lesions comprising monocytes and neutrophils. During infection with pathogenic microorganisms or autoimmune disease, IgGs induce proinflammatory responses and recruit innate effector cells. In contrast, high dose intravenous immunoglobulins (IVIG) are an effective treatment for various autoimmune and inflammatory diseases because of potent anti-inflammatory effects stemming in part from sialylated IgGs (sIgG) present at 1-3% in IVIG. We investigated the ability of IVIG to prevent fatal HSE when given 24 h post infection. We discovered a novel anti-inflammatory pathway mediated by low-dose IVIG that protected 129S6 mice from fatal HSE by modulating CNS inflammation independently of HSV specific antibodies or sIgG. IVIG suppressed CNS infiltration by pathogenic CD11b(+) Ly6C(high) monocytes and inhibited their spontaneous degranulation in vitro. FcγRIIb expression was required for IVIG mediated suppression of CNS infiltration by CD45(+) Ly6C(low) monocytes but not for inhibiting development of Ly6C(high) monocytes. IVIG increased accumulation of T cells in the CNS, and the non-sIgG fraction induced a dramatic expansion of FoxP3(+) CD4(+) T regulatory cells (Tregs) and FoxP3(-) ICOS(+) CD4(+) T cells in peripheral lymphoid organs. Tregs purified from HSV infected IVIG treated, but not control, mice protected adoptively transferred mice from fatal HSE. IL-10, produced by the ICOS(+) CD4(+) T cells that accumulated in the CNS of IVIG treated, but not control mice, was essential for induction of protective anti-inflammatory responses. Our results significantly enhance understanding of IVIG's anti-inflammatory and immunomodulatory capabilities by revealing a novel sIgG independent anti-inflammatory pathway responsible for induction of regulatory T cells that secrete the immunosuppressive cytokine IL-10 and further reveal the therapeutic potential of IVIG for treating viral induced inflammatory diseases.