Background The neuropeptide Pituitary adenylate cyclase-activating polypeptide (PACAP) plays pivotal roles in immunity and inflammation. So far, potential immune-modulatory properties of PACAP have not been investigated in experimental ileitis. Methodology/Principal Findings Mice were perorally infected with Toxoplasma (T.) gondii to induce acute ileitis (day 0) and treated daily with synthetic PACAP38 from day 1 to 6 post infection (p.i.; prophylaxis) or from day 4 to 6 p.i. (therapy). Whereas placebo-treated control mice suffered from acute ileitis at day 7 p.i. and succumbed to infection, intestinal immunopathology was ameliorated following PACAP prophylaxis. PACAP-treated mice exhibited increased abundance of small intestinal FOXP3+ cells, but lower numbers of ileal T lymphocytes, neutrophils, monocytes and macrophages, which was accompanied by less ileal expression of pro-inflammatory cytokines such as IL-23p19, IL-22, IFN-γ, and MCP-1. Furthermore, PACAP-treated mice displayed higher anti-inflammatory IL-4 concentrations in mesenteric lymph nodes and liver and higher systemic anti- inflammatory IL-10 levels in spleen and serum as compared to control animals at day 7 p.i. Remarkably, PACAP-mediated anti-inflammatory effects could also be observed in extra-intestinal compartments as indicated by reduced pro- inflammatory mediator levels in spleen (TNF-α, nitric oxide) and liver (TNF-α, IFN-γ, MCP-1, IL-6) and less severe histopathological sequelae in lungs and kidneys following prophylactic PACAP treatment. Strikingly, PACAP prolonged survival of T. gondii infected mice in a time-of-treatment dependent manner. Conclusion/Significance Synthetic PACAP ameliorates acute small intestinal inflammation and extra-intestinal sequelae by down-regulating Th1-type immunopathology, reducing oxidative stress and up-regulating anti-inflammatory cytokine responses. These findings provide novel potential treatment options of inflammatory bowel diseases.