Type I Interferon (IFN) is widely used for multiple sclerosis (MS) treatment, but its side effects are limiting and its mechanism of action still unknown. Furthermore, 30-50% of MS patients are unresponsive, and IFN can even induce relapses. Fundamental understanding of the cellular target(s) of IFN will help to optimize treatments by reducing side effects and separating beneficial from detrimental effects. To improve clinical systemic IFN usage, we are developing AcTaferons (Activity-on-Target IFNs = AFNs), optimized IFN-based immunocytokines that allow cell-specific targeting. In experimental autoimmune encephalitis (EAE) in mice, high dose WT mIFN could delay disease, but caused mortality and severe hematological deficits. In contrast, AFN targeted to dendritic cells (DC, via Clec9A) protected without mortality or hematological consequences. Conversely, CD8-targeted AFN did not protect and exacerbated weight loss, indicating the presence of both protective and unfavorable IFN effects in EAE. Comparing Clec9A-, XCR1-and SiglecH-targeting, we found that targeting AFN to plasmacytoid (p) and conventional (c) DC is superior and non-toxic compared to WT mIFN. DC-targeted AFN increased pDC numbers and their tolerogenic potential, evidenced by increased TGF and IDO synthesis and regulatory T cell induction. In addition, both regulatory T and B cells produced significantly more immunosuppressive TGF and IL-10. In conclusion, specific DC-targeting of IFN activity induces a robust in vivo tolerization, efficiently protecting against EAE, without noticeable side effects. Thus, dissecting positive and negative IFN effects via cell-specific targeting may result in better and safer MS therapy and response rates.