Theiler's murine encephalomyelitis virus (TMEV) induces a demyelinating disease in susceptible SJL mice that has similarities to multiple sclerosis in humans. TMEV infection of susceptible mice leads to a persistent virus infection of the central nervous system (CNS), which promotes the development of demyelinating disease associated with an inflammatory immune response in the CNS. TMEV infection of resistant C57BL6 mice results in viral clearance without development of demyelinating disease. Interestingly, TMEV infection of resistant mice deficient in IFNγ leads to a persistent virus infection in the CNS and development of demyelinating disease. We have previously shown that the innate immune response affects development of TMEV- induced demyelinating disease, thus we wanted to determine the role of IFNγ during the innate immune response. TMEV-infected IFNγ-deficient mice had an altered innate immune response, including reduced expression of innate immune cytokines, especially type I interferons. Administration of type I interferons, IFNα and IFNß, to TMEV-infected IFNγ-deficient mice during the innate immune response restored the expression of innate immune cytokines. Most importantly, administration of type I interferons to IFNγ-deficient mice during the innate immune response decreased the virus load in the CNS and decreased development of demyelinating disease. Microglia are the CNS resident immune cells that express innate immune receptors. In TMEV-infected IFNγ-deficient mice, microglia had reduced expression of innate immune cytokines, and administration of type I interferons to these mice restored the innate immune response by microglia. In the absence of IFNγ, microglia from TMEV-infected mice had reduced expression of some innate immune receptors and signaling molecules, especially IRF1. These results suggest that IFNγ plays an important role in the innate immune response to TMEV by enhancing the expression of innate immune cytokines, especially type I interferons, which directly affects the development of demyelinating disease.