The clinical use of intravenous immunoglobulin (IVIg) based on its immunomodulatory and anti-inflammatory potential remains an ongoing challenge. Fcγ receptor-mediated effects of IVIg, although well elucidated in certain pathologies, cannot entirely account for its proven benefit in several autoimmune disorders mediated by autoreactive T cells. In this study, we show that prophylactic infusion of IVIg prevents the development of experimental autoimmune encephalomyelitis (EAE), an accepted animal model for multiple sclerosis (MS). The protection was associated with peripheral increase in CD4+CD25+Foxp3+ regulatory T cell (Treg) numbers and function. The protection was Treg-mediated because IVIg failed to protect against EAE in mice that were depleted of the Treg population. Rather than inducing de novo generation from conventional T cells, IVIg had a direct effect on proliferation of natural Treg. In conclusion, our results highlight a novel mechanism of action of IVIg and provide a rationale to test the use of IVIg as an immunomodulatory tool to enhance Treg in early onset MS and other autoimmune and inflammatory conditions. © 2008 by The American Society of Hematology.