The ability of neural stem/progenitor cells (NSCs) to self-renew, migrate to damaged sites, and differentiate into neurons has renewed interest in using them in therapies for neurodegenerative disorders. Neurological diseases, including viral infections of the brain, are often accompanied by chronic inflammation, whose impact on NSC function remains unexplored. We have previously shown that chronic neuroinflammation, a hallmark of experimental herpes simplex encephalitis (HSE) in mice, is dominated by brain-infiltrating activated CD8 T-cells. In the present study, activated CD8 lymphocytes were found to suppress NSC proliferation profoundly. Luciferase positive (luc+) NSCs co-cultured with activated, MHC-matched, CD8+ lymphocytes (luc-) showed two- to five-fold lower luminescence than co-cultures with un-stimulated lymphocytes. On the other hand, similarly activated CD4+ lymphocytes did not suppress NSC growth. This differential lymphocyte effect on proliferation was confirmed by decreased BrdU uptake by NSC cultured with activated CD8 T-cells. Interestingly, neutralizing antibodies to interferon-gamma (IFN-γ) reversed the impact of CD8 lymphocytes on NSCs. Antibodies specific to the IFN-γ receptor-1 subunit complex abrogated the inhibitory effects of both CD8 lymphocytes and IFN-γ, indicating that the inhibitory effect of these cells was mediated by IFN-γ in a receptor-specific manner. In addition, activated CD8 lymphocytes decreased levels of nestin and Sox2 expression in NSCs while increasing GFAP expression, suggesting possible induction of an altered differentiation state. Furthermore, NSCs obtained from IFN-γ receptor-1 knock-out embryos were refractory to the inhibitory effects of activated CD8+ T lymphocytes on cell proliferation and Sox2 expression. Taken together, the studies presented here demonstrate a role for activated CD8 T-cells in regulating NSC function mediated through the production of IFN-γ. This cytokine may influence neuro-restorative processes and ultimately contribute to the long-term sequelae commonly seen following herpes encephalitis.