Mesenchymal stem cells (MSCs) derived from amnion are considered to be adult stem cells that can be easily obtained in large quantities by a less invasive method in comparison to bone marrow-derived MSCs (BM-MSCs). However; the biological properties and the differentiation capacity of amnion-derived MSCs (AM-MSCs) are still poorly characterized. The objectives of this study were to isolate, characterize and explore the potential of AM-MSCs in differentiating toward neural lineage in comparison to those of BM-MSCs. To isolate AM-MSCs, amnion was digested with trypsin-EDTA and cultured in Dulbecco's Modified Eagle's Medium (DMEM) supplemented with 10% fetal bovine serum. The expression profiles of several MSC markers were examined by flow cytometry. AM-MSCs from passage 3-5 were used for adipogenic, osteogenic and neural differentiation assays by culturing in appropriate induction media. The expression of several neural marker genes, including MAP-2, GFAP and beta-tubulin III in AM-MSCs was determined by quantitative real time-PCR. The expression of neural-specific markers, MAP-2 and beta-tubulin III, was subsequently confirmed by immunocytochemistry using confocal laser microscope. The results demonstrated that AM-MSCs could be easily expanded to 18-20 passages while maintaining the undifferentiated state and exhibiting MSC markers (CD73, CD90, and CD105) but do not express the hematopoietic markers (CD34 and CD45). Similar to BM-MSCs, AM-MSCs were able to differentiate to several mesodermal-lineages including adipocytes and osteoblasts. Moreover; these cells could be induced to differentiate to neuron-like cells as characterized by cell morphology and the expression of several neural markers including MAP-2, GFAP and beta-tubulin III. The present study demonstrated that AM-MSCs can be easily obtained and expanded in culture. These cells also have transdifferentiation capacity as evidenced by their neural differentiation potential. According to the results, amnion can be used as an alternative source of MSCs for stem cell therapy in neurodegenerative diseases.