Neurodegenerative diseases provoke robust immunological reactions in the central nervous system (CNS), which further deteriorate the neural tissue damage. We hypothesized that the expression levels of indoleamine 2,3-dioxygenase (IDO), an enzyme that has potent immune suppressive activities, in neural stem cells (NSCs) would have synergistic therapeutic effects against neurodegenerative diseases, since NSCs themselves have low IDO expression. In this study, the synergistic immune suppressive effects of rat fetal NSCs expressing IDO (rfNSCs-IDO) were validated by mixed leukocyte reaction (MLR) in vitro and an experimental autoimmune encephalomyelitis (EAE) animal model in vivo. rfNSCs-IDO showed significantly more suppressive effects on T cell proliferation in the MLR compared to control rfNSCs (rfNSCs-Cont). Importantly, IDO inhibition using 1-methyl-DL-tryptophan (1-MT), an IDO inhibitor, reversed the synergistic effects, confirming IDO-specific effects in rfNSCs-IDO. In the EAE animal model, systemic rfNSCs-IDO injections resulted in significant local immune suppression in the cervical lymph nodes and CNS, evidenced by a reduction in the number of activated T lymphocytes and an increase in regulatory T cell numbers, which induced significantly fewer clinical symptoms and faster recovery. In contrast, rfNSCs-Cont failed to reduce symptoms in the EAE animal models, although they showed local immune suppression, which was significantly less than that in rfNSCs-IDO. Taken together, IDO expression in NSCs synergistically potentiates the immune suppression activities of NSCs and could be applicable for the development of therapeutic modalities against various neurodegenerative diseases.