Due to the limitations of neural stem cells to repair neuronal damage in the human brain, alternative approaches of repair using autologous adult stem cells have been examined for direct cell-replacement, or paracrine mediated neuroprotective effects. Human bone marrow-derived stromal cells (hMSCs) are a heterogeneous adult stem cell population with diverse immunomodulatory properties and the potential to differentiate into cells characteristic of all three germ layers. hMSCs are a renewable source of progenitor cells suitable for cell-based tissue repair. The marrow isolated adult multilineage inducible (MIAMI) cells developed by our laboratory are a developmentally immature homogeneous subpopulation of hMSCs that maintain self-renewal potential during ex vivo expansion, efficient differentiation capacity into neuron-like cells in vitro, as well as direct in vivo neuroprotection and functional recovery in animal models of neurological diseases. We now address the early signaling mechanisms regulating the neuron-like differentiation of MIAMI cells in vitro, in response to activation of the neurotrophic tyrosine-kinase receptor, type 3 (NTRK3) via neurotrophin 3 (NT3). We molecularly characterize a novel role for Rac1b mediating the neurogenic potential of MIAMI cells. Rac1b had an overall negative modulatory effect on the NT3-stimulated Mek1/2-Erk1/2 signaling pathway, proneuronal gene expression and neurite-like extensions. Rac1b was required for NT3-stimulated cell proliferation of MIAMI cells, yet was found to repress CCND1 and CCNB1 mRNA expression independent of NT3 stimulation, suggesting a dual neurotrophin dependent/independent function. Differential levels of Rac1b activity in hMSCs may explain the apparent contradictory reports regarding their neurogenic potential. These findings demonstrate the in vitro neurogenic potential of hMSCs as governed by Rac1b during NT3 stimulation. © 2011.