Numerous studies have shown that abnormal motor behavior improves when neural progenitor cells (NPCs) are transplanted into animal models of neurodegeneration. The mechanisms responsible for this improvement are not fully understood. Indirect anatomical evidence suggests that attention of abnormal motor behavior is attributed, at least in part, to the secretion of trophic factors from the transplanted NPCs. However, there is little direct evidence supporting this hypothesis. Here we show that NPCs isolated from the subventricular zone (SVZ) of neonatal mice are highly teratogenic when transplanted into the neural tube of developing chick embryos and are neuroprotective for fetal dopaminergic neurons in culture because they release sonic hedgehog (Shh). In addition, the neuroprotective properties of NPCs can be exploited to promote better long-term survival of transplanted fetal neurons in an animal model of Parkinson's disease. Thus, cultured NPCs isolated from the SVZ can secrete at least one potent mitogen (Shh) that dramatically affects the fate of neighboring cells. This trait may account for some of the improvement in motor behavior often reported in animal models of neurodegeneration after transplantation of cultured NPCs that were isolated from the SVZ.