The TNF/TNFR system exerts multiple proinflammatory and immunosuppressive functions in the pathogenesis of chronic inflammation and autoimmunity. In EAE, the experimental model of Multiple Sclerosis (MS), genetic ablation of TNFR2, results in exacerbated immune reactivity and chronic disease course. The underlying mechanism driving this immunosuppressive function of TNFR2 remains unclear. We show here that chronic exacerbated EAE in TNFR2 KO mice is associated with increased Th17‐cell responses and reduced numbers of Foxp3⁺ Treg cells both in the spinal cord and peripheral lymphoid organs. Treg cells from TNFR2‐deficient animals developing EAE show decreased proliferative and suppressive functions, both ex vivo and in vivo, and appear responsible for the exacerbated non‐remitting disease, as evidenced by phenotypic rescue following adoptive transfer of Treg cells from WT but not TNFR2^−/− donors. Reciprocal BM transplantation experiments between WT and TNFR2‐deficient mice demonstrated that the capacity of TNFR2 to support Treg‐cell expansion and function during EAE is non‐intrinsic to Treg or other haematopoietic cells but requires expression of TNFR2 in radiation‐resistant cells of the host. These results reveal a previously unsuspected role for non‐haematopoietic TNFR2 in modulating Treg‐cell expansion and immune suppression during development of autoimmunity and suggest that a similar mechanism may affect chronicity and relapses characterizing human autoimmune disease, including MS.