Reestablishing an appropriate balance between T effector cells (Teff) and T regulatory cells (Treg) is essential for correcting autoimmunity. Multiple Sclerosis (MS) is an immune-mediated chronic central nervous system (CNS) disease characterized by neuroinflammation, demyelination, and neuronal degeneration, in which the Teff:Treg balance is skewed toward pathogenic Teff cells, Th1 and Th17 cells. Signal transducer and activator of transcription 3 (STAT3) is a key regulator of Teff:Treg balance. Using the structure-based design, we have developed a novel small-molecule prodrug LLL12b that specifically inhibits STAT3 and suppresses Th17 differentiation and expansion. Moreover, LLL12b regulates the fate decision between Th17 and Tregs in an inflammatory environment, shifting Th17:Treg balance toward Tregs and favoring the resolution of inflammation. Therapeutic administration of LLL12b after disease onset significantly suppresses disease progression in adoptively transferred, chronic, and relapsing-remitting experimental autoimmune encephalomyelitis. Disease relapses were also significantly suppressed by LLL12b given during the remission phase. Additionally, LLL12b shifts Th17:Treg balance of CD4 T cells from MS patients toward Tregs and increases Teff sensitivity to Treg-mediated suppression. These data suggest selective inhibition of STAT3 by the novel small molecule LLL12b recalibrates the effector and regulatory arms of CD4 T responses, representing a potentially clinically translatable therapeutic strategy for MS.