The Type I interferons (IFN), beta (IFN-β) and the alpha family (IFN-α), act through a common receptor and have anti-inflammatory effects. IFN-β is used to treat multiple sclerosis (MS) and is effective against experimental autoimmune encephalomyelitis (EAE), an animal model for MS. Mice with EAE show elevated levels of Type I IFNs in the central nervous system (CNS), suggesting a role for endogenous Type I IFN during inflammation. However, the therapeutic benefit of Type I IFN produced in the CNS remains to be established. The aim of this study was to examine whether experimentally induced CNS-endogenous Type I IFN influences EAE. Using IFN-β reporter mice, we showed that direct administration of polyinosinic-polycytidylic acid (poly I:C), a potent inducer of IFN-β, into the cerebrospinal fluid induced increased leukocyte numbers and transient upregulation of IFN-β in CD45/CD11b-positive cells located in the meninges and choroid plexus, as well as enhanced IFN-β expression by parenchymal microglial cells. Intrathecal injection of poly I:C to mice showing first symptoms of EAE substantially increased the normal disease-associated expression of IFN-α, IFN-β, interferon regulatory factor-7 and IL-10 in CNS, and disease worsening was prevented for as long as IFN-α/β was expressed. In contrast, there was no therapeutic effect on EAE in poly I:C-treated IFN receptor-deficient mice. IFN-dependent microglial and astrocyte response included production of the chemokine CXCL10. These results show that Type I IFN induced within the CNS can play a protective role in EAE and highlight the role of endogenous type I IFN in mediating neuroprotection.