Initially, the specific aim of transplantation studies was to investigate the regenerative capabilities of the mammalian nervous system. From this underlying impetus, a myriad of knowledge, spanning from molecular biology to neurobiology, has enhanced our understanding of regeneration and the applicability of fetal tissue transplantation in treating various neurodegenerative diseases. Current evidence suggests that transplantation of fetal neural tissue ameliorates the neurobiological and behavioral changes observed in animal models of central nervous system (CNS) disorders. In light of numerous basic science studies, clinical trials have begun to evaluate the potential of neural transplantation in treating human diseases. Indeed, modest progress has been reported in the treatment of Parkinson's disease. However, whereas fetal tissue transplantation has reached considerable success, it has also been observed to produce either no beneficial effects, magnify existing behavioral abnormalities, or even produce a unique constellation of deficits. Thus, while the prospects are promising, further investigations aimed at improving and refining existing transplantation paradigms are warranted before neural transplantation techniques can be of widespread value. This review article attempts to provide an overview of the neuroanatomical, neurochemical, and behavioral effects produced by transplanted fetal tissue in several animal models of CNS disorders. We have attempted to present both positive and adverse effects and to critically analyze the suitability of neural transplantation as a therapy for the various neurological disorders. In addition, alternative approaches, including the use of encapsulated neural tissue implants and genetically engineered cell lines along with their clinical potential, are discussed when appropriate.