The many and varied proposed applications of cell replacement therapies in the treatment of human disease states, particularly those arising from cell loss or dysfunction, have been discussed widely in both the scientific and popular press. Although an attractive concept, cell therapies require the development of a readily available source of donor cells suitable for transplantation. Embryonic stem (ES) cells, with proven ability to differentiate to all cell populations of the embryo and adult in vitro, provide a potential source of therapeutic cells. The differentiation capability of mouse ES cells in vitro has been studied extensively over the last 20 years and the formation of neural precursors and neural cell lineages from mouse ES cells is well established. Cell populations highly enriched/homogenous in neural precursors have been achieved using a variety of chemical or biological inducing agents coupled with selective growth conditions. Preliminary reports suggest that similar neural enrichment is seen when these methodologies are applied to primate and human ES cells. ES cell-derived neural precursors have been analyzed in vitro and in vivo and found to be functionally normal and, after introduction into rodent models of human neurodegenerative diseases, capable of effecting measurable disease recovery. We review progress in the formation of neural precursors from mouse ES cells, particularly the recent reports of directed differentiation of ES in response to biological inductive factors, and assess the transfer of these approaches to human ES cells. © 2004 Wiley-Liss, Inc.