Many central nervous system (CNS) diseases including stroke, spinal cord injury (SCI), and brain tumors are a significant cause of worldwide morbidity/mortality and yet do not have satisfying treatments. Cell-based therapy to restore lost function or to carry new therapeutic genes is a promising new therapeutic approach, particularly after human iPSCs became available. However, efficient generation of footprint-free and xeno-free human iPSC is a prerequisite for their clinical use. In this paper, we will first summarize the current methodology to obtain footprint- and xeno-free human iPSC. We will then review the current iPSC applications in therapeutic approaches for CNS regeneration and their use as vectors to carry proapoptotic genes for brain tumors and review their applications for modelling of neurological diseases and formulating new therapeutic approaches. Available results will be summarized and compared. Finally, we will discuss current limitations precluding iPSC from being used on large scale for clinical applications and provide an overview of future areas of improvement. In conclusion, significant progress has occurred in deriving iPSC suitable for clinical use in the field of neurological diseases. Current efforts to overcome technical challenges, including reducing labour and cost, will hopefully expedite the integration of this technology in the clinical setting.