We examined the role of soluble factors secreted by neurons and astrocytes in the differentiation of CNS stem cells. We showed that the soluble factors from neurons strongly induced multipotent cortical stem cells to acquire neuronal identity, while the factors from astrocytes promoted astrocytic differentiation. Neurons secreted the brain-derived neurotrophic factor and neurotrophin-3 to induce neuron differentiation, while astrocytes secreted ciliary neurotrophic factor for astrocyte differentiation. Both neurons and astrocytes secrete bone morphogenetic proteins (BMPs). Using BMP antagonists it was shown that BMPs were responsible for the neuron-induced neuronal differentiation, as well as the astrocyte-induced astrocytic differentiation. These findings demonstrate the importance of soluble signals in lineage-specific differentiation and provide evidence for the roles of neurons and astrocytes in stem cell differentiation.