Regenerative medicine is an evolving interdisciplinary topic of research involving numerous technological methods that utilize stem cells to repair damaged tissues. Particularly, mesenchymal stem cells (MSCs) are a great tool in regenerative medicine because of their lack of tumorogenicity, immunogenicity and ability to perform immunomodulatory as well as anti-inflammatory functions. Numerous studies have investigated the role of MSCs in tissue repair and modulation of allogeneic immune responses. MSCs derived from different sources hold unique regenerative potential as they are self-renewing and can differentiate into chondrocytes, osteoblasts, adipocytes, cardiomyocytes, hepatocytes, endothelial and neuronal cells, among which neuronal-like cells have gained special interest. MSCs also have the ability to secrete multiple bioactive molecules capable of stimulating recovery of injured cells and inhibiting inflammation. In this review we focus on neural differentiation potential of MSCs isolated from different sources and how certain growth factors/small molecules can be used to derive neuronal phenotypes from MSCs. We also discuss the efficacy of MSCs when transplanted in vivo and how they can generate certain neurons and lead to relief or recovery of the diseased condition. Furthermore, we have tried to evaluate the appropriatemerits of different sources ofMSCs with respect to their propensity towards neurological differentiation as well as their effectiveness in preclinical studies.