Mesenchymal stem cells (MSCs) are multipotent cells that differentiate into the mesenchymal lineages of adipocytes, osteocytes and chondrocytes. MSCs can also transdifferentiate and thereby cross lineage barriers, differentiating for example into neurons under certain experimental conditions. MSCs have anti-proliferative, anti-inflammatory and anti-apoptotic effects on neurons. Therefore, MSCs were tested in experimental autoimmune encephalomyelitis (EAE), an animal model of multiple sclerosis (MS), for their effectiveness in modulating the pathogenic process in EAE to develop effective therapies for MS. The data in the literature have shown that MSCs can inhibit the functions of autoreactive T cells in EAE and that this immunomodulation can be neuroprotective. In addition, MSCs can rescue neural cells via a mechanism that is mediated by soluble factors, which provide a suitable environment for neuron regeneration, remyelination and cerebral blood flow improvement. In this review, we discuss the effectiveness of MSCs in modulating the immunopathogenic process and in providing neuroprotection in EAE.