Human mesenchymal stem cells (MSCs) are easy to expand, are relatively safe, and can be transplanted in allogeneic recipients as off-the-shelf cells. MSCs can be induced to form functional peptidergic neurons and express the neurotransmitter gene, TAC1. Expression of TAC1 requires that the repressor gene, RE-1 silencing transcription factor (REST), is decreased. This study investigated the molecular pathway in TAC1 induction as MSCs differentiated into neurons and then applied the findings in a model of spinal cord injury (SCI) in zebrafish. We studied the developmental roles of the 2 cAMP response element (CRE) sites: CRE1 and CRE2. Activator protein-1 (AP-1) binding site overlaps with CRE2 (CRE2/AP-1). Reporter gene studies with the 5' regulatory region of TAC1 containing wild-type or mutant CRE sites and, parallel studies with ectopically expressed inhibitor of cAMP proteins (inducible cAMP early repressor) indicated that CRE1 and CRE2/AP-1 are activated at days 6 and 12, respectively. Studies with protein kinase-A (PKA) and Jun N-terminal kinase (JNK) inhibitors in the reporter gene studies, chromatin immunoprecipation assay, and ectopic expression of REST indicated the following pathways: Decrease of REST activated upstream c-Jun N-terminal kinase (JNK). In turn, JNK activated ATF-2 and AP-1 for interaction with CRE1 and CRE2/AP-1, respectively. To apply the finding to SCI, we transplanted 6-day-induced MSCs in transgenic HB9-GFP zebrafish larvae with SCI, in the presence or absence of JNK inhibitors. Imaging and functional studies showed significant improvement in the fish. The repair mechanism involved the activation of JNK. The findings have long-term implications for SCI repair with MSCs.