Amniotic epithelial cells (AECs) were reported to show a neuroprotective effect on neurons, but there was no direct evidence for a functional relationship between neural stem cells (NSCs) and AECs. The aim of this study was to determine whether AECs could stimulate differentiation and expand neurogenesis of NSCs, and whether the roles were due to a diffusible factor or required direct cell-cell contact. AECs were isolated from rat amnion on E14–16 and NSCs were isolated from neocortical tissue. The growth and differentiation of NSCs were compared under different conditions. The results showed that NSCs cultured with FGF-2 proliferated and formed floating neurospheres while those grown in B27 without FGF-2 failed to thrive. Those grown either with AEC conditioned medium or in transwells showed significantly improved survival. Moreover, the neural differentiation and length of neurite were greater in exogenous FGF groups when NSCs were allowed direct contact with AECs. Western blotting, immunocytochemistry and RT-PCR indicated that rat AECs could secrete NT-3 and BDNF. Furthermore, the presence of FGF-2 enhanced the function of AECs. These findings identified that AECs may be regarded as a critical component of NSCs niche and suggested that direct cell-to-cell contact may provide additional and independent support. Such information would circumvent the need for AECs-NSCs co-culture and could potentially facilitate the production of neurons for future clinical applications.