The present invention relates to the production of functional neurons from adult human mesenchymal stem cells using a retinoid. A retinoid, when used in the absence of a growth factor, transdifferentiates mesenchymal stem cells into functional neurons that exhibit synaptic transmission. Moreover, polarization of the functional neurons can be achieved using selected growth factors. Functional neurons produced in accordance with the method of the invention find use in the treatment or amelioration of diseases or conditions associated with neurodegeneration or nerve damage.