We studied the contribution of the CD28-B7 costimulatory T cell activation pathway to the pathogenesis of experimental autoimmune encephalomyelitis in the Lewis rat model. Systemic administration of CTLA4Ig suppressed clinical disease and was effective even when CTLA4Ig was delayed until day 10 postimmunization, a time when pathologic disease is evident. This protection was not reversible by systemic administration of high doses of IL-2. Detailed immunohistologic studies showed that CTLA4Ig therapy resulted in suppression of the inflammatory response with inhibition of Th1 (IL-2 and IFN-gamma) and sparing of Th2 (IL-4, IL-10, and IL-13) cytokines in the central nervous system. These results indicate that the CD28-B7 T cell costimulatory pathway plays an important role in experimental autoimmune encephalomyelitis, a Th1-mediated disease, and suggest that blockade of this costimulatory pathway protects against active disease by causing a state of immune deviation towards Th2 function. The ability of CTLA4Ig to treat animals with pathologically established disease may have important clinical implications for patients with multiple sclerosis.