Advanced and therapy-resistant prostate tumors often display neural or neuroendocrine behavior. We assessed the consequences of prostate cancer cell interaction with neural cells, which are rich in the human prostate and resident of the prostate tumor. In 3-dimensional co-culture with neurospheres, red fluorescent human LNCaP cells formed agglomerates on the neurosphere surface. Upon induced neural differentiation, some red fluorescent cells showed morphology of fully differentiated neural cells, indicating fusion between the cancer and neural stem cells. These fusion hybrids survived for extended times in a quiescent state. A few eventually restarted cell division and propagated to form derivative hybrid progenies. Clones of the hybrid progenies were highly heterogeneous; most had lost prostatic and epithelial markers while some had acquired neural marker expression. These results indicate that cancer cells can fuse with bystander neural cells in the tumor microenvironment; and cancer cell fusion is a direct route to tumor cell heterogeneity.