Peripheral antigen presenting cells (APCs) contribute to the maintenance of immune tolerance and are considered to play a critical role in promoting the (re)activation of autoreactive T cells in multiple sclerosis (MS). Interferon-beta (IFN-beta) is the principle immune-modulatory agent used in the treatment of MS, but its mechanism of action remains elusive. HLA-G is a non-classical MHC molecule (MHC class Ib) attributed chiefly immune-regulatory functions. We here investigated the role of monocyte-derived HLA-G in the immune-regulatory processes of MS and its implications for current immune-modulatory therapies. Monocytes constitutively express cell surface HLA-G1 and soluble HLA-G5. Comparison of monocytic HLA-G expression between patients with relapsing-remitting MS (n=17) and healthy donors (n=20) revealed significantly lower levels of HLA-G1 protein in MS patients. However, both groups showed a significant upregulation of HLA-G in response to IFN-beta in vitro. Serial measurements of HLA-G mRNA levels in MS patients before and during IFN-beta therapy corroborated the relevance of these results in vivo: 1 month after initiation of IFN-beta1b therapy (n=9), HLA-G1 and HLA-G5 were significantly increased compared to baseline levels and remained elevated during treatment for 6 months (n=3). Importantly, functional experiments demonstrated that monocyte-derived HLA-G inhibits both Th1 (IFN-gamma, IL-2) and Th2 (IL-10) cytokine production by antigen-stimulated autologous CD4 T cells. Soluble HLA-G added to antigen-specific T cell lines (TCLs) has similar effects on the release of cytokines and reduces T cell proliferation. Although both IFN-beta and IFN-gamma strongly enhance HLA-G1 and HLA-G5 expression by monocytes in vitro, IFN-beta leads to a stronger relative upregulation of HLA-G compared to classical MHC class I molecules than stimulation with IFN-gamma. Taken together, monocyte-derived HLA-G mediates the inhibition of autologous CD4 T cell activation and might be involved in immune-regulatory pathways in the pathogenesis of MS. We conclude that some desirable immune-modulatory effects of INF-beta might be accomplished via the upregulation of the immune-tolerogenic molecule HLA-G.