Disorders of the central nervous system are a major concern in modern human societies. Studies of these disorders require the use of suitable model systems that accurately reproduce the human situation. In this article we focus on the possibilities of using the human NT-2 teratocarcinoma cell line for studies on neuronal differentiation, cellular function and neurodegeneration. Neurons generated from undifferentiated NT-2 precursor cells show neuronal morphology, express neuronal markers, exhibit action potentials and have the advantage of homogeneous cellular composition of clonally derived cells. They release a number of different neurotransmitters, respond to stimulation with glutamate, gamma-amino-butyric acid, and nitric oxide, and form functional synapses in culture. Depending on the differentiation protocol, NT-2 cells also have the capacity to develop into glial cells. Different neuronal differentiation procedures and biological properties of NT-2 neurons are described in the text. In transplantation experiments, differentiated NT-2 neurons integrated successfully into the nervous systems of both experimental animals and human patients without evidence for tumor formation, underlining their value for both basic research and clinical applications. We discuss some potential applications in the fields of basic research, drug discovery, and therapy of CNS damage with particular emphasis on neuronal transplantation and different cell death mechanisms in neuronal degeneration. Grafting of NT-2 neurons has been shown to effectively reverse functional defects in animal disease models. Moreover, an ongoing phase 2 randomized clinical trial indicates the safety and feasibility of NT- 2 neuron transplantation for the treatment of human patients with cerebral stroke.