T ypes A and B Niemann-Pick disease (NPD) are lysosomal storage disorders resulting from loss of acid sphingomyelinase (ASM) activity. We have used a knockout mouse model of NPD (ASMKO mice) to evaluate the effects of direct intracerebral transplantation of bone marrow–derived mesenchymal stem cells (MSCs) on the progression of neurological disease in this disorder. MSCs were transduced with a retroviral vector to overexpress ASM and were injected into the hippocampus and cerebellum of 3-week-old ASMKO pups. Transplanted cells migrated away from the injection sites and survived at least 6 months after transplantation. Seven of 8 treated mice, but none of the untreated controls, survived for ≥ 7 months after transplant. Survival times were greater in sex-matched than in sex-mismatched transplants. Transplantation significantly delayed the Purkinje cell loss that is characteristic of NPD, although the protective effect declined with distance from the injection site. Overall ASM activity in brain homogenates was low, but surviving Purkinje cells contained the retrovirally expressed human enzyme, and transplanted animals showed a reduction in cerebral sphingomyelin. These results reveal the potential of treating neurodegenerative lysosomal storage disorders by intracerebral transplantation of bone marrow–derived MSCs.