Mice deficient in interferon (IFN)-γ or IFN-γ receptor develop progressive and fatal experimental autoimmune encephalomyelitis (EAE). We demonstrate that CD4 T cells lacking IFN-γ production were required to passively transfer EAE, indicating that they were disease-mediating cells in IFN-γ knockout (KO) mice. IFN-γ KO mice accumulated 10–16-fold more activated CD4 T cells (CD4⁺CD44^hi) than wild-type mice in the central nervous system during EAE. CD4⁺CD44^hi T cells in the spleen and central nervous system of IFN-γ KO mice during EAE showed markedly increased in vivo proliferation and significantly decreased ex vivo apoptosis compared with those of wild-type mice. IFN-γ KO CD4⁺CD44^hi T cells proliferated extensively to antigen restimulation in vitro and accumulated larger numbers of live CD4⁺ CD44^hi T cells. IFN-γ completely suppressed proliferation and significantly induced apoptosis of CD4⁺CD44^hi T cells responding to antigen and hence inhibited accumulation of live, activated CD4 T cells. We thus present novel in vivo and in vitro evidence that IFN-γ may limit the extent of EAE by suppressing expansion of activated CD4 T cells.