Cell transplantation is a promising strategy for the treatment of neurodegenerative and muscle degenerative diseases. Many kinds of cells, including embryonic stem cells and tissue stem cells, have been considered as candidates for transplantation therapy. Bone marrow stromal cells (MSCs) have great potential as therapeutic agents since they are easy to isolate and can be expanded from patients without serious ethical or technical problems. We discovered a new method for the highly efficient and specific induction of functional Schwann cells, neurons and skeletal muscle lineage cells from both rat and human MSCs. These induced cells were transplanted into animal models of neurotraumatic injuries, Parkinsons disease, stroke and muscle dystrophies, resulting in the successful integration of transplanted cells and an improvement in behavior of the transplanted animals. Here we focus on the respective potentials of MSCderived cells and discuss the possibility of clinical application in degenerative diseases.