Type III IFNs (IFNLs) are newly discovered cytokines, acting at epithelial and other barriers, that exert immunomodulatory functions in addition to their primary roles in antiviral defense. In this study, we define a role for IFNLs in maintaining autoreactive T cell effector function and limiting recovery in a murine model of multiple sclerosis (MS), experimental autoimmune encephalomyelitis. Genetic or Ab-based neutralization of the IFNL receptor (IFNLR) resulted in lack of disease maintenance during experimental autoimmune encephalomyelitis, with loss of CNS Th1 effector responses and limited axonal injury. Phenotypic effects of IFNLR signaling were traced to increased APC function, with associated increase in T cell production of IFN-γ and GM-CSF. Consistent with this, IFNL levels within lesions of CNS tissues derived from patients with MS were elevated compared with MS normal-appearing white matter. Furthermore, expression of IFNLR was selectively elevated in MS active lesions compared with inactive lesions or normal-appearing white matter. These findings suggest IFNL signaling as a potential therapeutic target to prevent chronic autoimmune neuroinflammation.