Multipotent stem=progenitor cells from bone marrow stroma (mesenchymal stromal cells or MSCs) were previously shown to enhance proliferation and differentiation of neural stem cells (NSCs) in vivo, but the molecular basis of the effect was not defined. Here coculturing human MSCs (hMSCs) with rat NSCs (rNSCs) was found to stimulate astrocyte and oligodendrocyte differentiation of the rNSCs. To survey the signaling pathways involved, RNA from the cocultures was analyzed by species-specific microarrays. In the hMSCs, there was an upregulation of transcripts for several secreted factors linked to differentiation: bone morphogenetic protein 1 (BMP1), hepatocyte growth factor (HGF), and transforming growth factor isoforms (TGFb1 and TGFb3). In both the hMSCs and the rNSCs, there was an upregulation of transcripts for Notch signaling. The role of TGFb1 was verified by the demonstration that hMSCs in coculture increased secretion of TGFb1, the rNSCs expressed the receptor, and an inhibitor of TGFb signaling blocked differentiation. The role of Notch signaling was verified by the demonstration that in the cocultures hMSCs expressed a Notch ligand at sites of cell contact with rNSCs, and the rNSCs expressed the receptor, Notch 1. Increased Notch signaling in both cell types was then demonstrated by assays of transcript expression and by a reporter construct for downstream targets of Notch signaling. The results demonstrated that glial differentiation of the rNSCs in the cocultures was driven by increased secretion of soluble factors such as TGFb1 by the hMSCs and probably through increased cell contact signaling between the hMSCs and rNSCs through the Notch pathway.