The role of interferon (IFN)-γ in multiple sclerosis (MS) and its animal model, experimental autoimmune encephalomyelitis (EAE), has remained as an enigmatic paradox for more than 30 years. Several studies attribute this cytokine a prominent proinflammatory and pathogenic function in these pathologies. However, accumulating evidence shows that IFN-γ also plays a protective role inducing regulatory cell activity and modulating the effector T cell response. Several innate and adaptive immune cells also develop opposite functions strongly associated with the production of IFN-γ in EAE. Even the suppressive activity of different types of regulatory cells is dependent on IFN-γ. Interestingly, recent data supports a stage-specific participation of IFN-γ in EAE providing a plausible explanation for previous conflicting results. In this review, we will summarize and discuss such literature, emphasizing the protective role of IFN-γ on immune cells. These findings are fundamental to understand the complex role of IFN-γ in the pathogenesis of these diseases and can provide basis for potential stage-specific therapy for MS targeting IFN-γ-signaling or IFN-γ-producing immune cells.