Th1 and Th17 cells contribute to the pathogenesis of multiple sclerosis (MS) and EAE, an animal model of MS. Th1 cells are characterized by the abundant expression of IFN-γ, whereas Th17 cells express high levels of IL-17. T cell activation leads to the nuclear translocation of nuclear factors and activators of T-cells (NFATs), which contribute to the expression of IFN-γ and IL-17. NFAT5 is the newest member of the NFAT family, however, its role in the pathogenesis of EAE is unknown. We are therefore studying MOG35–55-induced EAE in mice with a global heterozygous knockdown of NFAT5 (NFAT5+/−, NFAT5−/−is lethal) with NFAT5+/+ mice as a control. Interestingly, we found that the knockdown of NFAT5 actually increased EAE induction rate from 65% to 74% and delayed the recovery of EAE, indicating that NFAT5 is protective against the disease. Naïve CD4 cell differentiation reveals that the NFAT5 knockdown increased IFN-γ expression without significantly affecting IL-10 expression in Th1 cells. In vitro differentiation of Th17 cells from NFAT5+/− mice was not successful. IL-6 and protein tyrosine phosphatase SHP-1 have been demonstrated to inhibit IFN-γ expression in Th1 cells. To study the mechanisms by which NFAT5 knockdown increases IFN-γ expression in Th1 cells, we have examined the effects of NFAT5 knockdown on IL-6 and SHP-1. NFAT5 knockdown had no significant effect on IL-6 mRNA level. Instead, our ongoing experiments show that knockdown of NFAT5 reduces SHP-1 mRNA level by 38% (n=3, p=0.11) with a concomitant 44% increase in phosphorylation of Y705 of STAT3, one of its targets (n=3, p=0.2), and has no significant effect on SHP-2 mRNA level. In conclusion: NFAT5 inhibits EAE possibly by suppressing the expression of IFN-γ in Th1 cells.