The ability of mesenchymal stem cells (MSCs) to differentiate into neural cells makes them potential replacement therapeutic candidates in neurological diseases. Presently, overexpression of brain-derived neurotrophic factor (BDNF), which is crucial in the regulation of neural progenitor cell differentiation and maturation during development, was sufficient to convert the mesodermal cell fate of human umbilical cord blood-derived MSCs (hUCB-MSCs) into a neuronal fate in culture, in the absence of specialized induction chemicals. BDNF overexpressing hUCB-MSCs (MSCs-BDNF) yielded an increased number of neuron-like cells and, surprisingly, increased the expression of neuronal phenotype markers in a time-dependent manner compared with control hUCB-MSCs. In addition, MSCs-BDNF exhibited a decreased labeling for MSCs-related antigens such as CD44, CD73, and CD90, and decreased potential to differentiate into mesodermal lineages. Phosphorylation of the receptor tyrosine kinase B (TrkB), which is a receptor of BDNF, was increased significantly in MSC-BDNF. BDNF overexpression also increased the phosphorylation of β-catenin and extracellular signal-regulated kinases (ERKs). Inhibition of TrkB availability by treatment with the TrkB-specific inhibitor K252a blocked the BDNF-stimulated phosphorylation of β-catenin and ERKs, indicating the involvement of both the β-catenin and ERKs signals in the BDNF-stimulated and TrkB-mediated neural differentiation of hUCB-MSCs. Reduction of β-catenin availability using small interfering RNA-mediated gene silencing inhibited ERKs phosphorylation. However, β-catenin activation was maintained. In addition, inhibition of β-catenin and ERKs expression levels abrogated the BDNF-stimulated upregulation of neuronal phenotype markers. Furthermore, MSC-BDNF survived and migrated more extensively when grafted into the lateral ventricles of neonatal mouse brain, and differentiated significantly into neurons in the olfactory bulb and periventricular astrocytes. These results indicate that BDNF induces the neural differentiation of hUCB-MSCs in culture via the TrkB-mediated phosphorylation of ERKs and β-catenin and following transplantation into the developing brain.