The tryptophan-catabolizing enzyme indoleamine-2,3-dioxygenase (IDO) initiates the first and ratelimiting step of the kynurenine pathway. It is induced by proinflammatory cytokines such as interferon-β and interferon-γ and has established effects in the control of intracellular parasites. The recent detection of its decisive function in immune tolerance at the maternal-fetal interface stimulated various studies unraveling its regulatory effect on T cells in many pathologies. In the brain, IDO can be induced in microglia by interferon-γ-producing T helper (Th) 1 cells, thereby initiating a negative feedback loop which downmodulates neuroinflammation in experimental autoimmune encephalomyelitis (EAE), the animal model of multiple sclerosis (MS). This protective effect could to be counteracted by the production of neurotoxic metabolites of the kynurenine pathway such as quinolinic acid, which are produced upon IDO induction. Some metabolites of the kynurenine pathway can pass the blood-brain barrier and thus could act as neurotoxins, e.g., during systemic infection. In this paper, we give a brief overview on established immune regulatory functions of IDO, review recent data on IDO expression in the brain, and propose that autoimmune neuroinflammation and the increasingly appreciated neuronal damage in MS are linked by Th1-mediated IDO induction through subsequent synthesis of toxic metabolites of tryptophan.