The properties of self-renewal and multi-lineage differentiation make stem cells attractive candidates for use in cellular reparative therapy, particularly in neurological diseases where there is a paucity of treatment options. However, clinical trials using foetal material in Parkinson's disease have been disappointing and highlighted problems associated with the use of embryonic stem cells, including ethical issues and practical concerns regarding teratoma formation. Understandably, this has led investigators to explore alternative sources of stem cells for transplantation. The expression of neuroectodermal markers by cells of bone marrow origin focused attention on these adult stem cells. Although early enthusiasm has been tempered by dispute regarding the validity of reports of in vitro (trans)differentiation, the demonstration of functional benefit in animal models of neurological disease is encouraging. Here we will review some of the required properties of stem cells for use in transplantation therapy with specific reference to the development of bone marrow-derived cells as a source of cells for repair in demyelination.