Traditionally, applied stem cell research has been segregating into strategies aiming at endogenous repair and cell transplantation. Recent advances in both fields have unraveled unexpected potential for synergy between these disparate fields. The increasing dissection of the step-wise integration of adult-born neurons into an established brain circuitry provides a highly informative blueprint for the functional incorporation of grafted neurons into a host brain. On the other hand, in vitro recapitulation of developmental differentiation cascades permits the de novo generation of various neural cell types from pluripotent embryonic stem (ES) cells. Advanced tools in stem cell engineering enable not only genetic selection and instruction of disease-specific donor cells for neural replacement but also the exploitation of stem cells as transgenic cellular model systems for human diseases. In a comparative approach we here illuminate the functional integration of neurons derived from endogenous and transplanted stem cells, the evolving technologies for advanced stem cell engineering and the impact of cloned and mutated stem cells on disease modeling.