Background: Demyelinating polyneuropathy is a debilitating, poorly understood disease that can exist in acute (Guillain-Barré syndrome) or chronic forms. Interleukin-10 (IL-10), although traditionally considered an anti-inflammatory cytokine, has also been implicated in promoting abnormal angiogenesis in the eye and in the pathobiology of autoimmune diseases such as lupus and encephalomyelitis. Principal Findings: Overexpression of IL-10 in a transgenic mouse model leads to macrophage-mediated demyelinating polyneuropathy. IL-10 upregulates ICAM-1 within neural tissues, promoting massive macrophage influx, inflammation-induced demyelination, and subsequent loss of neural tissue resulting in muscle weakness and paralysis. The primary insult is to perineural myelin followed by secondary axonal loss. Infiltrating macrophages within the peripheral nerves demonstrate a highly pro-inflammatory signature. Macrophages are central players in the pathophysiology, as in vivo depletion of macrophages using clodronate liposomes reverses the phenotype, including progressive nerve loss and paralysis. Macrophage-mediate demyelination is dependent on Fas-ligand (FasL)-mediated Schwann cell death. Significance: These findings mimic the human disease chronic idiopathic demyelinating polyneuropathy (CIDP) and may also promote further understanding of the pathobiology of related conditions such as acute idiopathic demyelinating polyneuropathy (AIDP) or Guillain-Barré syndrome.