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Glucocorticoids (GCs) are widely used to treat acute relapses of multiple sclerosis (MS). In this study, we demonstrate that liposomal encapsulation augments the therapeutic potency of GCs as they ameliorate experimental autoimmune encephalomyelitis (EAE) to the same extent as free GC, but at strongly reduced dosage and application frequency. Importantly, this is accompanied by an altered mode of action. Unlike free GCs, which mainly target T lymphocytes during EAE therapy, liposomal GCs only marginally affect T cell apoptosis and function. In contrast, liposomal GCs efficiently repress proinflammatory macrophage functions and upregulate anti-inflammatory genes associated with the alternatively activated M2 phenotype. The GC receptor (GR) per se is indispensable for the therapeutic efficacy of liposomal GC. In contrast to free GCs, however, the individual deletion of the GR either in T cells or myeloid cells has little effect on the efficacy of liposomal GCs in the treatment of EAE. Only the combined deletion of the GR in both cellular compartments markedly compromises the therapeutic effect of liposomal GCs on disease progression. In conclusion, encapsulation of GC does not only enhance their efficacy in the treatment of EAE but also alters their target cell specificity and their mode of action compared with free GCs. [ABSTRACT FROM AUTHOR]