EGF-responsive neural stem cells isolated from murine striatum have the capacity to differentiate into both neurons and glia in vitro. Genetic modification of these cells is hindered by a number of problems such as gene stability and transfection efficiency. To circumvent these problems we generated transgenic mice in which the human GFAP promoter directs the expression of human NGF. Neural stem cells isolated from the forebrain of these transgenic animals proliferate and form clusters, which appear identical to stem cells generated from control animals. Upon differentiation in vitro, the transgenic stem cell-derived astrocytes express and secrete bioactive hNGF. Undifferentiated GFAP-hNGF or control stem cells were transplanted into the striatum of adult rats. One and 3 weeks after transplantation, hNGF was detected immunocytochemically in an halo around the transplant sites. In GFAP-hNGF-grafted animals, intrinsic striatal neurons proximal to the graft appear to have taken up hNGF secreted by the grafted cells. Ipsilateral to implants of GFAP-hNGF-secreting cells, choline acetyltransferase-immunoreactive neurons within the striatum were hypertrophied relative to the contralateral side or control-grafted animals. Further, GFAP-hNGF-grafted rats displayed a robust sprouting of p75 neurotrophin receptor-positive fibers emanating from the underlying basal forebrain. These studies indicate that EGF-responsive stem cells which secrete hNGF under the direction of the GFAP promoter display in vitro and in vivo properties similar to that seen following other methods of NGF delivery and this source of cells may provide an excellent avenue for delivery of neurotrophins such as NGF to the central nervous system.