Multiple sclerosis (MS) is an inflammatory demyelinating disease of the central nervous system (CNS). The release of inflammatory cytokines and pro-oxidant molecules from microglia has been shown to play a key role in the pathology of MS. Thus, suppression of microglial cell activation is an attractive therapeutic option. Yokukansan, a traditional Japanese herbal medicine, has been shown to suppress microglial activity in the CNS. However, whether or not yokukansan reduces demyelination observed in the CNS during MS remains unknown. In this study, female C57BL/6 mice were fed a diet containing 0.2% cuprizone (bis-cyclohexanone oxaldihydrazone) to induce demyelination in the corpus callosum. We investigated whether or not yokukansan reduces cuprizone-induced demyelination using immunohistochemical analyses. Furthermore, we examined the in vitro anti-inflammatory effects of yokukansan on LPS-stimulated BV2 cells, a murine microglial cell line. Luxol fast blue staining and immunostaining for myelin basic protein demonstrated that yokukansan reduces demyelination of the corpora callosa of cuprizone-fed mice. In addition, yokukansan significantly decreased the number of activated microglial cells in the corpora callosa of cuprizone-fed mice. Furthermore, treatment with 500 μg/ml yokukansan suppressed the expression of interleukin-1β and inducible nitric-oxide synthase mRNA and protein in LPS-stimulated BV2 cells. These findings suggest that yokukansan reduces demyelination owing to anti-inflammatory effects on microglia. As yokukansan has few adverse effects, yokukansan has the potential to be a novel option to treat MS.