The type I interferons (IFNs), IFN-α and IFN-β, are cytokines that have antiviral, antiproliferative, and immunomodulatory activities. Data are now emerging that suggest that type I IFNs are also important mediators of anti-inflammatory responses. These findings, largely driven by studies to explain the beneficial effects of IFN-β in the treatment of multiple sclerosis, an autoimmune disease of the central nervous system, offer a number of mechanisms for the anti-inflammatory properties of type I IFNs. Type I IFNs, through their ability to induce the immunosuppressive cytokine interleukin-10 (IL-10), mediate the inhibition of proinflammatory gene products. In addition, type I IFNs induce other immunosuppressive mediators such as suppressor of cytokine signaling–1 (SOCS-1) and tristetrapolin (TTP), which act by divergent mechanisms to restore homeostasis to the immune system. Furthermore, type I IFNs mediate anti-inflammatory and protective effects in a variety of autoimmune disease models such as experimental colitis, experimental allergic encephalomyelitis, experimental arthritis, and neonatal inflammation. Here, we discuss the molecular basis for the anti-inflammatory properties of type I IFNs and their therapeutic potential in autoimmune and inflammatory diseases.