Stem cells isolated from adult mammalian tissues may provide new approaches for the autologous treatment of disease and tissue repair. Although the potential of adult stem cells has received much attention, it has also recently been brought into question. This article reviews the recent work describing the ability of non-hematopoietic stem cells derived from adult bone marrow to form neural derivatives and their potential for brain repair. Earlier transplantation experiments imply that grafted adult stem cells can differentiate into neural derivatives. Recent reports suggest, however, that such findings may be misleading and grafted cells acquiring different identities may merely be explained by their fusion with host cells and not the result of radical changes to their program of cellular differentiation. Nonetheless, in vitro studies have shown that neural development by bone-marrow-derived stem cells also appears possible. Understanding the molecular mechanisms that specify the neural lineage will lead to the development of tools for the targeted production of neural cell types in vitro that may ultimately provide a source of material to treat specific neurological deficits. BioEssays 24:708–713, 2002. © 2002 Wiley Periodicals, Inc.