Stem cells possess great promise as therapeutic tools for neurological disorders such as neurodegenerative diseases (Parkinson’s disease and Huntington’s disease), cerebrovascular diseases (stroke), neurotraumata (spinal cord injury) and demyelinating diseases (multiple sclerosis). This aspiration is based on the cells` ability to maintain a status of self-renewal and to differentiate into the various cell types of an organism. The use of the cells ranges from in vitro to in vivo studies in animal models, ending with clinical applications in humans. The self-renewal and commitment of stem/progenitor cells to differentiate and mature involves complex events leading to the generation of different phenotypes via distinctive developmental programs. Small molecules provide a tool with which to influence these regulatory changes in a controlled manner and to help understand the underlying mechanisms. Furthermore, substantial progress in generating induced pluripotent stem cells has been made using small molecules to replace reprogramming factors and enhance the reprogramming efficiency and kinetics, thus generating cells more compatible with the requirements for cell replacement therapies. In this review we will present the recent progress on the use of small molecules in embryonic and induced pluripotent stem cell research. In the final section we will give a short summary of the clinical approaches using these cells.