Beneficial effects of short-term whole-molecule erythropoietin (EPO) therapy have been demonstrated on several animal models of diverse central nervous system pathology. However, the increased hematocrit induced by EPO-driven marrow stimulation greatly limits its potential for side effect-free therapy. We created a library of EPO-derived fragments based on the hypothesis that 2 distinct functions, erythropoiesis and tissue protection, reside in different regions of the molecule. Several small EPO-derived peptides within the A loop of whole EPO molecule were screened for tissue protection in EAE mice. The 19-mer JM-4 peptide that contains 2 cysteine molecules consistently demonstrated the most potent clinical beneficial effects without producing hematocrit alterations in animal models of EAE. The JM-4-induced tissue protection was associated with modulation of the immunoregulatory process that drives inflammation and provokes subsequent autoimmune damage. Like the whole EPO molecule, JM-4 effectively modulated immune/inflammatory reaction within both the peripheral lymphatic tissue and central nervous system. The major effects induced by JM-4 include blocked expansion of monocyte/dendritic antigen presenting cell and T helper 17 cell populations, decreased proinflammatory cytokine production, and sharply enhanced expansion of the regulatory T-cell population. JM-4 shows promise for treatment of a broad spectrum of neural and non-neural conditions associated with inflammation.