A therapeutic goal in the treatment of certain CNS diseases, including multiple sclerosis, amyotrophic lateral sclerosis, and Parkinson disease, is to down-regulate inflammatory pathways. Inflammatory molecules produced by microglia are responsible for removal of damaged neurons, but can cause collateral damage to normal neurons located close to defective neurons. Although estrogen can inactivate microglia and inhibit the recruitment of T cells and macrophages into the CNS, there is controversy regarding which of the two estrogen receptors (ERs), ERα or ERβ, mediates the beneficial effects in microglia. In this study, we found that ERβ, but not ERα, is expressed in microglia. Using the experimental autoimmune encephalomyelitis (EAE) model in SJL/J mice, we evaluated the benefit of an ERβ agonist as a modulator of neuroinflammation. Treatment of EAE mice with LY3201, a selective ERβ agonist provided by Eli Lilly, resulted in marked reduction of activated microglia in the spinal cord. LY3201 down-regulated the nuclear transcription factor NF-κB, as well as the NF-κB–induced gene inducible nitric oxide synthase in microglia and CD3⁺ T cells. In addition, LY3201 inhibited T-cell reactivity through regulation of indoleamine-2,3-dioxygenase. In the EAE model, treatment with LY3201 decreased mortality in the first 2 wk after disease onset, and also reduced the severity of symptoms in mice surviving for 4 wk. Our data show that ERβ-selective agonists, by modulating the immune system in both microglia and T cells, offer promise as a useful class of drugs for treating degenerative diseases of the CNS.