This study was undertaken to elucidate the molecular mechanisms by which lithium regulates the development of spinal cord-derived neural progenitor cells (NPCs) in vitro and after transplanted in vivo. Our results show that lithium at the therapeutic concentration significantly increases the proliferation and neuronal differentiation of NPCs in vitro. Specific ELISAs, western blotting, and quantitative real-time RT-PCR assays demonstrate that lithium treatment significantly elevates the expression and production of brain-derived neurotrophic factor (BDNF) by NPCs in culture. Application of a BDNF neutralizing antibody in culture leads to a marked reduction in the neurogenesis of lithium-treated NPCs to the control level. However, it shows no effects on the proliferation of lithium-treated NPCs. These findings suggest that the BDNF pathway is possibly involved in the supportive role of lithium in inducing NPC neurogenesis but not proliferation. This study also provides evidence that lithium is able to elevate the neuronal generation and BDNF production of NPCs after transplantation into the adult rat ventral horn with motoneuron degeneration because of spinal root avulsion, which highlights the therapeutic potential of lithium in cell replacement strategies for spinal cord injury because of its ability to promote neuronal differentiation and BDNF production of grafted NPCs in the injured spinal cord.