Recent reports of neural differentiation of postnatally derived bone marrow and umbilical cord cells have transformed our understanding of the biology of cell lineages, differentiation, and plasticity. While much controversy remains, it is clear that adult tissues, and bone marrow in particular, are composed in part of cells with much more diverse lineage capacity than previously thought. Traditionally, cell-based therapies for the CNS have been derived from fetal or embryonic origin. By harnessing the neural potential of readily-available and accessible adult bone marrow and umbilical cord blood stem cells, substantial ethical and technical dilemmas may be circumvented. This review will focus on the potential of adult bone marrow derived cells and umbilical cord blood stem cells for cell replacement and repair therapies of the central nervous system. The various isolation protocols, phenotypic properties, and methods for in vivo and in vitro neural differentiation of mesenchymal stem cells/marrow stromal cells (MSC), hematopoietic stem cells (HSC), multipotent adult progenitor cells (MAPCs), and umbilical cord blood stem cells (UCBSC) will be discussed. Current progress regarding transplant paradigms in various disease models as well as in our understanding of transdifferentiation mechanisms will be presented.