The cell surface heparan sulfate proteoglycan, syndecan-1, has been reported to be a negative regulator of various inflammatory processes, but its precise mode of action is poorly defined. In this study, we use the murine model of the 35-55 peptide of myelin oligodendrocyte glycoprotein-induced experimental autoimmune encephalomyelitis (EAE), a T lymphocyte-mediated inflammation where the steps in disease development and recovery are well characterized, to decipher how syndecan-1 impacts on the inflammatory reaction. Syndecan-1 knockout (Sdc-1(-/-)) mice show enhanced disease severity and impaired recovery. The use of bone marrow chimeric mice reveals that both an immune cell and a CNS-resident source of syndecan-1 contribute to this phenotype. Epithelial cells of the choroid plexus, where initial CCL20-induced leukocyte recruitment to the brain occurs, are identified as the predominant site of syndecan-1 expression. Syndecan-1 is lost from this site during the course of EAE by shedding into the cerebrospinal fluid, which correlates with loss of epithelial cell surface-bound CCL20 and is associated with the upregulation of IL-6 expression. In Sdc-1(-/-) mice, early leukocyte recruitment via the choroid plexus is enhanced, and IL-6 is elevated, which collectively results in higher numbers of the disease inducing Th17 cells in the CNS, thereby contributing to enhanced disease severity. Furthermore, Sdc-1(-/-) mice have intrinsically elevated plasma cell numbers and higher myelin oligodendrocyte glycoprotein-specific Ab levels during EAE, which we propose contributes to impaired recovery. Our data identify the choroid plexus epithelium as a novel source of IL-6 in EAE and demonstrate that its expression negatively correlates with syndecan-1 expression at this site.