Pericytes stabilize microvessels by wrapping them with their processes. They are located within the neurovascular unit between endothelial cells, astrocytes, and neurons, and interact with neighboring cells to generate diverse functional responses that are critical for central nerve system (CNS) function in health and disease. Recent evidence suggests that brain pericytes play crucial roles in regulating microvascular functions, such as blood-brain barrier properties, capillary blood flow, angiogenesis, and the entry of leukocytes into the brain. Pericytes also take part in tissue repair after CNS injury and may have stem cell-like properties. In addition, recent reports suggest that peripheral nerve pericytes, forming the blood-nerve barrier (BNB), regulate BNB function and basement membrane maintenance. Microvascular dysfunction due to pericyte degeneration initiates secondary neurodegenerative changes in the nervous system. In this review, we will first describe the origin, heterogeneity, and the physiological characteristics of pericytes. We next review possible pathological mechanisms and consequences of pericyte impairment in nervous system diseases including Alzheimer's diseases, diabetes, vascular dementia, and stroke. Finally, we will discuss how pericytes can be targeted for developing novel therapeutic approaches for treating patients with neurological disorders.