Experimental allergic encephalomyelitis (EAE) is an autoimmune disease characterized by inflammation and demyelination in the central nervous system. The effect of the immunosuppressive molecule transforming growth factor-beta, (TGF-beta 1) on chronic relapsing EAE produced by the transfer of myelin basic protein-specific T cell lines was studied. TGF-beta 1 markedly inhibited the activation and proliferation of myelin-basic protein-specific lymph node cells in vitro. This reduced the capacity of these cells to transfer EAE. In addition, administration of TGF-beta 1 in vivo consistently resulted in an improved clinical course, even when given during ongoing disease. Immunopathologic study demonstrated a marked reduction in central nervous system damage and expression of cell-surface lymphocyte function-associated Ag-1 and class II MHC molecules in TGF-beta 1-treated mice. These findings have identified TGF-beta 1 as a possible therapeutic agent for the human demyelinating disease multiple sclerosis.