Plasmacytoid dendritic cells (pDC) are a sub-population of dendritic cells (DC) that produce large amounts of type I interferon (IFN) in response to nucleic acids that bind and activate toll-like-receptor (TLR)9 and TLR7. Type I IFN can regulate the function of B, T, DC, and natural killer (NK) cells and can also alter the residence time of leukocytes within lymph nodes. Activated pDC can also function as antigen presenting cells (APC) and have the potential to prime and differentiate T cells into regulatory or inflammatory effector cells, depending on the context. In this review we discuss pDC ontogeny, function, trafficking, and activation. We will also examine how pDC can potentially be involved in regulating immune responses in the periphery as well as within the central nervous system (CNS) during multiple sclerosis (MS) and its animal model, experimental autoimmune encephalomyelitis (EAE).