Adult neural stem cells (aNSCs) derived from the subventricular zone of the brain show therapeutic effects in EAE, an animal model of the chronic inflammatory neurodegenerative disease MS; however, the beneficial effects are modest. One critical weakness of aNSC therapy may be an insufficient antiinflammatory effect. Here, we demonstrate that i.v. or i.c.v. injection of aNSCs engineered to secrete IL-10 (IL-10–aNSCs), a potent immunoregulatory cytokine, induced more profound functional and pathological recovery from ongoing EAE than that with control aNSCs. IL-10–aNSCs exhibited enhanced antiinflammatory effects in the periphery and inflammatory foci in the CNS compared with control aNSCs, more effectively reducing myelin damage, a hallmark of MS. When compared with mice treated with control aNSCs, those treated with IL-10–aNSCs demonstrated differentiation of transplanted cells into greater numbers of oligodendrocytes and neurons but fewer astrocytes, thus enhancing exogenous remyelination and neuron/axonal growth. Finally, IL-10–aNSCs converted a hostile environment to one supportive of neurons/oligodendrocytes, thereby promoting endogenous remyelination. Thus, aNSCs engineered to express IL-10 show enhanced ability to induce immune suppression, remyelination, and neuronal repair and may represent a novel approach that can substantially improve the efficacy of neural stem cell–based therapy in EAE/MS.