Enhancing repair of myelin is an important but still elusive therapeutic goal in many neurological disorders. In multiple sclerosis, an inflammatory demyelinating disease, endogenous remyelination does occur but is frequently insufficient to restore function. Both parenchymal oligodendrocyte progenitor cells and endogenous adult neural stem cells resident within the subventricular zone are known sources of remyelinating cells. Here we characterize the contribution to remyelination of a subset of adult neural stem cells, identified by their expression of Gli1, a transcriptional effector of the sonic hedgehog pathway. We show that these cells are recruited from the subventricular zone to populate demyelinated lesions in the forebrain but never enter healthy, white matter tracts. Unexpectedly, recruitment of this pool of neural stem cells, and their differentiation into oligodendrocytes, is significantly enhanced by genetic or pharmacological inhibition of Gli1. Importantly, complete inhibition of canonical hedgehog signalling was ineffective, indicating that the role of Gli1 both in augmenting hedgehog signalling and in retarding myelination is specialized. Indeed, inhibition of Gli1 improves the functional outcome in a relapsing/remitting model of experimental autoimmune encephalomyelitis and is neuroprotective. Thus, endogenous neural stem cells can be mobilized for the repair of demyelinated lesions by inhibiting Gli1, identifying a new therapeutic avenue for the treatment of demyelinating disorders.