Neurodegenerative diseases comprise a heterogeneous spectrum of neural disorders that cause severe and progressive cognitive and motor deficits. A histological hallmark of these disorders is the occurrence of disease-specific cell death in specific regional subpopulations of neurons, such as the loss of dopaminergic neurons in the substantia nigra in Parkinsons disease. Neurodegenerative disease can also possibly occur from the loss or dysfunction of selected glial cell subsets, such as the dysfunction of supportive glial cells around somatic motor neurons in amyotrophic lateral sclerosis. The central nervous system (CNS), unlike many other tissues, has a very limited capacity for self-repair. Mature nerve cells lack the ability to regenerate, although endogenous neural stem cells exist in the adult brain that do have very limited ability to generate new functional neurons in response to injury. Rapid advances in stem cell biology have opened an alternative, fascinating perspective of neurogenesis by activation of endogenous neural stem cells and/or transplantation of in vitro-expanded stem cells and/or their neuronal- or glial-differentiated progeny. Embryonic stem (ES) cells, because of their ability to provide seemingly unlimited supply of specific cell types, their amenability to genetic engineering manipulations, and their broad developmental potential, are expected to become a cell source and biological delivery system for use in a variety of neurodegenerative diseases, and are likely to play a role in the development of novel cell-based therapies for these indications. However, before the full potential of ES cells can be realized for regenerative medicine, we need to understand mechanisms regulating their proliferation, differentiation into therapeutically relevant cells, and most importantly in the case of neuronal and glial lineages, to characterize their functional properties. In the present review we will be focusing on the factors and methodologies responsible for differentiation of ES cell into different neural precursors and neural cell lineages with particular emphasis on the potential research and clinical applications of ES cells in the field of neurodegenerative disease.