Stem cell–based therapy has been proposed as a potential means of treatment for a variety of brain disorders. Because ethical and technical issues have so far limited the clinical translation of research using embryonic/fetal cells and neural tissue, respectively, the search for alternative sources of therapeutic stem cells remains ongoing. Here, we report that upon transplantation into mice with chemically induced hippocampal lesions, human olfactory ecto–mesenchymal stem cells (OE-MSCs) — adult stem cells from human nasal olfactory lamina propria — migrated toward the sites of neural damage, where they differentiated into neurons. Additionally, transplanted OE-MSCs stimulated endogenous neurogenesis, restored synaptic transmission, and enhanced long-term potentiation. Mice that received transplanted OE-MSCs exhibited restoration of learning and memory on behavioral tests compared with lesioned, nontransplanted control mice. Similar results were obtained when OE-MSCs were injected into the cerebrospinal fluid. These data show that OE-MSCs can induce neurogenesis and contribute to restoration of hippocampal neuronal networks via trophic actions. They provide evidence that human olfactory tissue is a conceivable source of nervous system replacement cells. This stem cell subtype may be useful for a broad range of stem cell–related studies.