The lack of therapies for progressive multiple sclerosis highlights the need to understand the regenerative process of remyelination that can follow CNS demyelination. This involves an innate immune response consisting of microglia and macrophages, which can be polarized to distinct functional phenotypes: pro-inflammatory (M1) and anti-inflammatory or immunoregulatory (M2). We found that a switch from an M1- to an M2-dominant response occurred in microglia and peripherally derived macrophages as remyelination started. Oligodendrocyte differentiation was enhanced in vitro with M2 cell conditioned media and impaired in vivo following intra-lesional M2 cell depletion. M2 cell densities were increased in lesions of aged mice in which remyelination was enhanced by parabiotic coupling to a younger mouse and in multiple sclerosis lesions that normally show remyelination. Blocking M2 cell-derived activin-A inhibited oligodendrocyte differentiation during remyelination in cerebellar slice cultures. Thus, our results indicate that M2 cell polarization is essential for efficient remyelination and identify activin-A as a therapeutic target for CNS regeneration.