CD4+ CD25+ T regulatory (Treg) cells expressing the Foxp3 transcription factor have been shown to be present in the CNS during the autoimmune disease experimental autoimmune encephalomyelitis (EAE) and can inhibit EAE clinical disease by an IL-10-dependent mechanism. In addition, IL-10 expression in the CNS late in the EAE disease course has been attributed to recovery. However, it is not known how Treg cells and IL-10 expressions are regulated during EAE. We have previously shown a requirement for B cells in recovery from EAE and here investigated whether this was due to a deficiency in Treg cells and IL-10 in the CNS. We found that B cell deficiency resulted in a delay in the emergence of Foxp3-expressing Treg cells and IL-10 in the CNS during EAE, but not in the periphery. Reconstitution with wild-type B cells resulted in disease recovery and normalized IL-10 and Foxp3 expression. However, reconstitution with B7-deficient B cells did not. Furthermore, we show that IL-10 and Foxp3 expression is enhanced in CNS nonencephalitogenic T cells. These data suggest a novel mechanism whereby B cells regulate CD4+ CD25+ Treg cells via B7 and subsequently enter the CNS and suppress autoimmune inflammation, mediating recovery.