Polysialic acid (PSA) on NCAM is an important modulator of cell-cell interactions during development and regeneration. Here we investigated whether PSA overexpression influences neural cell migration and myelination. We stably expressed a GFP-tagged polysialytransferase, PSTGFP, in mouse neurospheres and induced prolonged PSA synthesis. Using a chick xenograft assay for migration, we show that PSA can instruct precursor migration along the ventral pathway. PSA persistence did not change neural precursor multipotentiality in vitro but induced a delay in oligodendrocyte differentiation. PSTGFP+ precursors showed widespread engraftment in shiverer brain, closely similar to that observed with control precursors expressing a fluorescent protein. Initially, myelination by oligodendrocytes was delayed but, eventually, down-regulation of PSTGFP occurred, allowing myelination to proceed. Thus down-regulation of polysialyltransferases takes place even in cells where its RNA is under the control of a heterologous promoter and engineering PSA overexpression in neural precursors does not cause irreversible unphysiological effects.