Chronic degenerative diseases and traumatic injuries are responsible for a decline in neuronal function, which often limit life span. While solid organ transplantation such as liver and kidney has been already applied for thousands of patients, great limitation exists in case of nervous system. Cell transplantation is one of the strategies with potential for treatment of such neural disorders, and many kinds of cells including embryonic stem cells and neural 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 and technical problems. We found a method for the highly efficient and specific induction of functional neurons and Schwann cells from both rat and human MSCs. Induced neurons and Schwann cells were transplanted in animal models of Parkinsons disease, stroke, peripheral nerve injury, and spinal cord injury resulting in the successful integration of transplanted cells and improvement in behavior of transplanted animals. Here we focus on the respective potentials of MSC-derived cells and discuss the possibility of clinical application in neurodegenerative and neurotraumatic diseases.