We examined the phenotype and function of cells infiltrating the central nervous system (CNS) of mice persistently infected with Theiler’s murine encephalomyelitis virus (TMEV) for evidence that viral antigens are presented to T cells within the CNS. Expression of major histocompatibility complex (MHC) class II in the spinal cords of mice infected with TMEV was found predominantly on macrophages in demyelinating lesions. The distribution of I-A^s staining overlapped that of the macrophage marker sialoadhesin in frozen sections and coincided with that of another macrophage/microglial cell marker, F4/80, by flow cytometry. In contrast, astrocytes, identified by staining with glial fibrillary acidic protein, rarely expressed detectable MHC class II, although fibrillary gliosis associated with the CNS damage was clearly seen. The costimulatory molecules B7-1 and B7-2 were expressed on the surface of most MHC class II-positive cells in the CNS, at levels exceeding those found in the spleens of the infected mice. Immunohistochemistry revealed that B7-1 and B7-2 colocalized on large F4/80⁺macrophages/microglia in the spinal cord lesions. In contrast, CD4⁺ T cells in the lesions expressed mainly B7-2, which was found primarily on blastoid CD4⁺ T cells located toward the periphery of the lesions. Most interestingly, plastic-adherent cells freshly isolated from the spinal cords of TMEV-infected mice were able to process and present TMEV and horse myoglobin to antigen-specific T-cell lines. Furthermore, these cells were able to activate a TMEV epitope-specific T-cell line in the absence of added antigen, providing conclusive evidence for the endogenous processing and presentation of virus epitopes within the CNS of persistently infected SJL/J mice.