Syngeneic, pluripotent Lin(-)Sca1(+) bone marrow stem cells (SC), transferred to mice with experimental autoimmune encephalomyelitis, a model of multiple sclerosis, enhanced recovery, prevented relapses and promoted myelin repair. SC-treated mice showed elevated interferon-gamma production and induction of indoleamine 2,3-dioxygenase (IDO) in CD11c(+) dendritic cells (DC). IDO induction was specific since in the presence of IDO-producing CD11c(+) DC, PLP stimulated T cell proliferation was inhibited and the IDO-inhibitor, 1-MT, abrogated the SC effect. Relapse prevention during chronic disease correlated with decreased responsiveness to PLP(178-191) and MBP(85-99). Thus, pluripotent SC induce IDO in DC leading to inhibition of antigen reactivity and spreading in EAE.