Neurodegenerative diseases are characterized by a progressive degeneration of selective neural populations. This selective hallmark pathology and the lack of effective treatment modalities make these diseases appropriate candidates for cell therapy. Bone marrow-derived mesenchymal stem cells (MSCs) are self-renewing precursors that reside in the bone marrow and may further be exploited for autologous transplantation. Autologous transplantation of MSCs entirely circumvents the problem of immune rejection, does not cause the formation of teratomas, and raises very few ethical or political concerns. More than a few studies showed that transplantation of MSCs resulted in clinical improvement. However, the exact mechanisms responsible for the beneficial outcome have yet to be defined. Possible rationalizations include cell replacement, trophic factors delivery, and immunomodulation. Cell replacement theory is based on the idea that replacement of degenerated neural cells with alternative functioning cells induces long-lasting clinical improvement. It is reasoned that the transplanted cells survive, integrate into the endogenous neural network, and lead to functional improvement. Trophic factor delivery presents a more practical short-term approach. According to this approach, MSC effectiveness may be credited to the production of neurotrophic factors that support neuronal cell survival, induce endogenous cell proliferation, and promote nerve fiber regeneration at sites of injury. The third potential mechanism of action is supported by the recent reports claiming that neuroinflammatory mechanisms play an important role in the pathogenesis of neurodegenerative disorders. Thus, inhibiting chronic inflammatory stress might explain the beneficial effects induced by MSC transplantation. Here, we assemble evidence that supports each theory and review the latest studies that have placed MSC transplantation into the spotlight of biomedical research.