CD25⁺CD4⁺ regulatory T cells inhibit the activation of autoreactive T cells in vitro and in vivo, and suppress organ‐specific autoimmune diseases. The mechanism of CD25⁺CD4⁺ T cells in the regulation of experimental autoimmune encephalomyelitis (EAE) is poorly understood. To assess the role of CD25⁺CD4⁺ T cells in EAE, SJL mice were immunized with myelin proteolipid protein (PLP)_139–151 to develop EAE and were treated with anti‐CD25 mAb. Treatment with anti‐CD25 antibody following immunization resulted in a significant enhancement of EAE disease severity and mortality. There was increased inflammation in the central nervous system (CNS) of anti‐CD25 mAb‐treated mice. Anti‐CD25 antibody treatment caused a decrease in the percentage of CD25⁺CD4⁺ T cells in blood, peripheral lymph node (LN) and spleen associated with increased production of IFN‐γ and a decrease in IL‐10 production by LN cells stimulated with PLP_130–151in vitro. In addition, transfer of CD25⁺CD4⁺ regulatory T cells from naive SJL mice decreased the severity of active EAE. In vitro, anti‐CD3‐stimulated CD25⁺CD4⁺ T cells from naive SJL mice secreted IL‐10 and IL‐10 soluble receptor (sR) partially reversed the in vitro suppressive activity of CD25⁺CD4⁺ T cells. CD25⁺CD4⁺ T cells from IL‐10‐deficient mice were unable to suppress active EAE. These findings demonstrate that CD25⁺CD4⁺ T cells suppress pathogenic autoreactive T cells in actively induced EAE and suggest they may play an important natural regulatory function in controlling CNS autoimmune disease through a mechanism that involves IL‐10.