Bone marrow-derived cells (BMCs) are reported to trans-differentiate into neural lineages, and are expected to offer a valuable resource for treating severe diseases of the central nervous system. BMCs that show neural differentiation may differ morphologically from typical marrow stromal cells. The present study aimed to obtain efficient generation of cells with neural features from bone marrow. Serum-free culture was applied to BMCs to prevent the growth of differentiated cells. Using basic fibroblast growth factor and extracellular matrix, rodent BMCs capable of proliferation and neural differentiation expanded in monolayer form. Cultured cells were small, round or spindle-shaped, and expressed nestin. Under neural differentiation conditions, cells developed long, thin cellular processes with branches, and expressed neuronal and glial phenotypes. Intracerebrally transplanted BMCs survived and migrated into the subcortex of syngenic animals.