Bone marrow stromal cells (BMSCs) are multipotent and can be induced to differentiate into different lineages including osteogenic, chondrogenic, myogenic and neuronal phenotypes. BMSCs were reported to be a suitable option for regenerative medical research. In this study, BMSCs were induced into GABAergic phenotypes using β-mercaptoethanol (βME) and retinoic acid (RA) as preinducers followed by potassium chloride as inducer, and were evaluated by fibronectin and Oct-4. The percentages of cells immunoreactive for nestin, neurofilaments (NF 68, NF 160, and NF 200), GABA and GABA synthesizing and packaging enzymes (GAD1, GAD2, VGAT) were used for evaluating GABAergic differentiation. RT-PCR was used for confirming the expression of these enzymes. The differentiated cells were loaded and unloaded with FM1-43 in order to assess the functionality of the cells. At the preinduction stage, the cells downregulated fibronectin and Oct-4, and expressed neuronal markers. At the induction stage, the preinduced cells transdifferentiated into GABAergic cells, as confirmed by immunohistochemistry and RT-PCR. The GABAergic cells were stained and destained with FM1-43. Therefore, the two-stage induction protocol resulted in transdifferentiation of BMSCs into GABAergic cells with synaptic release upon stimulation.