Objective Although intravenous immunoglobulin (IVIG) is the first‐line immunotherapy in autoimmune encephalitis, all supporting evidence comes from retrospective case series. Here, we performed a prospective clinical trial of IVIG for functional recovery in autoimmune encephalitis. Methods This single‐arm, open‐label study assessed the efficacy and safety of 10% intravenous IVIG treatment in newly diagnosed patients with possible autoimmune encephalitis. Patients received IVIG (0.4 g/kg/day) for 5 days. Rescue immunotherapy was permitted when the patient deteriorated before day 8 or showed no improvement at day 8. The primary outcome was the change in the modified Rankin Scale (mRS) score at day 8 and 29. The secondary outcomes were the mRS score improvement and the score changes and improvements on four other clinical scales. Results Overall, 23 patients received IVIG (intension‐to‐treat, ITT), and 18 patients completed the study according to the protocol (per‐protocol, PP). mRS improved significantly at days 8 and 29 compared to baseline in both the ITT and PP populations. Other secondary outcomes also improved significantly at day 8, 15, and 29 versus baseline. In the PP population, 6/18 patients achieved favorable outcomes with IVIG alone (mRS = 0~2 at day 8), and 12/18 patients received rescue immunotherapy. Five adverse events were reported in relation to IVIG, all of which were mild. Interpretation IVIG improved neurological functional outcomes, and the improvement was evident by day 8. Adverse effects were tolerable. These data provide the prospective evidence regarding the efficacy of IVIG in improving the functional outcomes of autoimmune encephalitis.