IFN-β remains the most widely prescribed treatment for relapsing remitting multiple sclerosis. Despite widespread use of IFN-β, the therapeutic mechanism is still partially understood. Particularly, the clinical relevance of increased B cell activity during IFN-β treatment is unclear. In this article, we show that IFN-β pushes some B cells into a transitional, regulatory population that is a critical mechanism for therapy. IFN-β treatment increases the absolute number of regulatory CD19+ CD24++ CD38++ transitional B cells in peripheral blood relative to treatment-naive and Copaxone-treated patients. In addition, we found that transitional B cells from both healthy controls and IFN-β–treated MS patients are potent producers of IL-10, and that the capability of IFN-β to induce IL-10 is amplified when B cells are stimulated. Similar changes are seen in mice with experimental autoimmune encephalomyelitis. IFN-β treatment increases transitional and regulatory B cell populations, as well as IL-10 secretion in the spleen. Furthermore, we found that IFN-β increases autoantibody production, implicating humoral immune activation in B cell regulatory responses. Finally, we demonstrate that IFN-β therapy requires immune-regulatory B cells by showing that B cell–deficient mice do not benefit clinically or histopathologically from IFN-β treatment. These results have significant implications for the diagnosis and treatment of relapsing remitting multiple sclerosis.