The CD40-CD154 interaction is an attractive target for therapeutic intervention in many autoimmune disorders, including multiple sclerosis. Previously, we showed that CD154 blockade both inhibited the onset of experimental autoimmune encephalomyelitis and blocked clinical disease progression (relapses) in mice with established disease. The mechanism of this protection is poorly understood. Because CD154 plays a role in Th1 development, its blockade has been thought to promote anti-inflammatory Th2 responses. However, these conclusions have primarily been based on extrapolated data from in vitro experiments, which may not accurately reflect the more complex events occurring in vivo. In this paper we determine how the immune response develops under the influence of therapeutic CD154 blockade in vivo. We demonstrate that anti-CD154 treatment does not alter the early expansion of Ag-specific T cells in secondary lymphoid organs or result in deviation to a Th2-dominant response. Interestingly, the late expansion and retention of Th1 cells in the lymph nodes were markedly reduced following immunization of Ab-treated mice, and this coincided with a recompartmentalization of these cells to the spleen. Most importantly, anti-CD154 treatment eliminated the retention/expansion of encephalitogenic Th1 cells, but not their entry into the CNS. These data indicate that a major mechanism by which CD154 blockade protects against autoimmune disease is by controlling the amplitude of acute phase Th1 responses in the draining lymph nodes and by preventing the sustained expansion of effector cells within the target organ.