Lysophospholipids are signaling molecules that play broad and major roles within the nervous system during both early development and neural injury. We used neural differentiation of human embryonic stem cells (hESC) as an in vitro model to examine the specific effects of lysophosphatidic acid (LPA) at various stages of neural development, from neural induction to mature neurons and glia. We report that LPA inhibits neurosphere formation and the differentiation of neural stem cells (NSC) toward neurons, without modifying NSC proliferation, apoptosis, or astrocytic differentiation. LPA acts through the activation of the Rho/ROCK and the phosphatidylinositol 3-kinase/Akt pathways to inhibit neuronal differentiation. This study is the first demonstration of a role for LPA signaling in neuronal differentiation of hESC. As LPA concentrations increase during inflammation, the inhibition of neuronal differentiation by LPA might contribute to the low level of neurogenesis observed following neurotrauma.