Cell replacement and gene therapy using neural stem cells (NSCs) have been widely touted as a promising treatment for CNS diseases including brain tumors. Histone deacetylase (HDAC) inhibitors have been used to explore mechanisms behind the lineage-specific differentiation of NSCs and as modulators of gene therapy. We have used the human embryonic midbrain stem cell line NGC-407 and the HDAC inhibitor 4-phenylbutyrate (4-PB) to investigate the differentiation from epigenetic perspectives. NGC-407 cells can differentiate into both neurons and glial cells, evidenced by morphological characteristics as well as up-regulation of the respective markers β-tubulin III and glial fibrillary acidic protein (GFAP) and simultaneous down-regulation of the NSC-marker nestin. Genomic DNA extracted from the differentiating cells was globally more methylated than that of the proliferating cells. The differentiating cells showed increased expression of the de novo DNA methyltransferase DNMT3B along with strong immunoreactivity in the cell nuclei. When these cells were treated with 4-PB, both the astrocytic and the neuronal differentiation phenotypes were suppressed, which paralleled a substantially weakened DNMT3B immunoreactivity in the cell nuclei. Importantly, 4-PB treatment preserves the immature phenotype of these differentiating cells as indicated by Western blot analysis and immunocytochemical analyses of the NSC markers, nestin and CD133. Nestin becomes entirely degraded 5 days after induction of differentiation, but upon exposure to 4-PB, some of the differentiating cells retain the integrity of nestin and concurrently, CD133 is also up-regulated. Taken together, the data suggests that HDAC activity is necessary for human embryonic NSC differentiation.