Grafting of neural stem cells into the mammalian central nervous system (CNS) has been performed for some decades now, both in basic research and clinical applications for neurological disorders such as Parkinson's and Huntington's disease, stroke, and spinal cord injuries. Albeit the "proof of principle" status that neural grafts can reinstate functional deficits and rebuild damaged neuronal circuitries, many critical scientific questions are still open. Among them are the manifold immunological aspects that are encountered during the graft-host interaction in vivo. For example, the experience with allografted cells in absence of immunosuppressant drugs has raised serious doubts about an immunological privileged site within the CNS as compared to other engraftment sites in the body. This review discusses recent experimental and clinical findings demonstrating that neural stem cells have unique characteristics that help them modulate the host immunological defense, but, under some conditions, may still trigger a rejection process. Implications of these findings on neural grafting and potential new therapeutic applications are discussed.