Autoimmune encephalomyelitis, a mouse model for multiple sclerosis, is characterized by the activation of immune cells, demyelination of axons in the CNS, and paralysis. We found that TGF-β1 synthesis in glial cells and TGF-β-induced signaling in the CNS were activated several days before the onset of paralysis in mice with autoimmune encephalomyelitis. While early production of TGF-β1 was observed in glial cells TGF-β signaling was activated in neurons and later in infiltrating T cells in inflammatory lesions. Systemic treatment with a pharmacological inhibitor of TGF-β signaling ameliorated the paralytic disease and reduced the accumulation of pathogenic T cells and expression of IL-6 in the CNS. Priming of peripheral T cells was not altered, nor was the generation of TH17 cells, indicating that this effect was directed within the brain, yet affected the immune system. These results suggest that early production of TGF-β1 in the CNS creates a permissive and dangerous environment for the initiation of autoimmune inflammation, providing a rare example of the brain modulating the immune system. Importantly, inhibition of TGF-β signaling may have benefits in the treatment of the acute phase of autoimmune CNS inflammation.