Interferon-induced protein with tetratricopeptide repeats 2, Ifit2, is critical in restricting neurotropic murine-β-coronavirus, RSA59 infection. RSA59 intracranial injection of Ifit2-deficient (-/-) compared to wild-type (WT) mice results in impaired acute microglial activation, reduced CX3CR1 expression, limited migration of peripheral lymphocytes into the brain, and impaired virus control followed by severe morbidity and mortality. While the protective role of Ifit2 is established for acute viral encephalitis, less is known about its influence during the chronic demyelinating phase of RSA59 infection. To understand this, RSA59 infected Ifit2-/- and Ifit2+/+ (WT) were observed for neuropathological outcomes at day 5 (acute phase) and 30 post-infection (chronic phase). Our study demonstrates that Ifit2 deficiency causes extensive RSA59 spread throughout the spinal cord gray and white matter, associated with impaired CD4+ T and CD8+ T cell infiltration. Further, the cervical lymph nodes of RSA59 infected Ifit2-/- mice showed reduced activation of CD4+ T cells and impaired IFNγ expression during acute encephalomyelitis. Interestingly, BBB integrity was better preserved in Ifit2-/- mice, as evidenced by tight junction protein Claudin-5 and adapter protein ZO-1 expression surrounding the meninges and blood vessels and decreased Texas red dye uptake, which may be responsible for reduced leukocyte infiltration. In contrast to sparse myelin loss in WT mice, the chronic disease phase in Ifit2-/- mice was associated with severe demyelination and persistent viral load, even at low inoculation doses. Overall, our study highlights that Ifit2 provides antiviral functions by promoting acute neuroinflammation and thereby aiding virus control and limiting severe chronic demyelination. IMPORTANCE Interferons execute their function by inducing specific genes collectively termed as interferon-stimulated genes (ISGs), among which interferon-induced protein with tetratricopeptide repeats 2, Ifit2, is known for restricting neurotropic viral replication and spread. However, little is known about its role in viral spread to the spinal cord and its associated myelin pathology. Toward this, our study using a neurotropic murine β-coronavirus and Ifit2-deficient mice demonstrates that Ifit2 deficiency causes extensive viral spread throughout the gray and white matter of the spinal cord accompanied by impaired microglial activation and T cell infiltration. Furthermore, infected Ifit2-deficient mice showed impaired activation of T cells in the cervical lymph node and relatively intact blood-brain barrier integrity. Overall, Ifit2 plays a crucial role in mounting host immunity against neurotropic murine coronavirus in the acute phase while preventing mice from developing viral-induced severe chronic neuroinflammatory demyelination, the characteristic feature of human neurological disease multiple sclerosis (MS).