In a previous study, we found that human neural stem cells (HNSCs) exposed to high concentrations of secreted amyloid-precursor protein (sAPP) in vitro differentiated into mainly astrocytes, suggesting that pathological alterations in APP processing during neurodegenerative conditions such as Alzheimer's disease (AD) may prevent neuronal differentiation of HNSCs. Thus, successful neuroplacement therapy for AD may require regulating APP expression to favorable levels to enhance neuronal differentiation of HNSCs. Phenserine, a recently developed cholinesterase inhibitor (ChEI), has been reported to reduce APP levels in vitro and in vivo. In this study, we found reductions of APP and glial fibrillary acidic protein (GFAP) levels in the hippocampus of APP23 mice after 14 days treatment with (+)-phenserine (25 mg/kg) lacking ChEI activity. No significant change in APP gene expression was detected, suggesting that (+)-phenserine decreases APP levels and reactive astrocytes by posttranscription regulation. HNSCs transplanted into (+)-phenserine-treated APP23 mice followed by an additional 7 days of treatment with (+)-phenserine migrated and differentiated into neurons in the hippocampus and cortex after 6 weeks. Moreover, (+)-phenserine significantly increased neuronal differentiation of implanted HNSCs in hippocampal and cortical regions of APP23 mice and in the CA1 region of control mice. These results indicate that (+)-phenserine reduces APP protein in vivo and increases neuronal differentiation of HNSCs. Combination use of HNSC transplantation and treatment with drugs such as (+)-phenserine that modulate APP levels in the brain may be a useful tool for understanding mechanisms regulating stem cell migration and differentiation during neurodegenerative conditions in AD.