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Mesenchymal stem cells (MSCs) are promising seed cells for neural regeneration therapy owing to their plasticity and accessibility. They possess several inherent characteristics advantageous for the transplantation-based treatment of neurological disorders, including neural differentiation, immunosuppression, neurotrophy, and safety. However, the therapeutic efficacy of MSCs alone remains unsatisfactory in most cases. To improve some of their abilities, many studies have employed genetic engineering to transfer key genes into MSCs. Both viral and nonviral methods can be used to overexpress therapeutic proteins that complement the inherent properties. However, to date, different modes of gene transfer have specific drawbacks and advantages. In addition, MSCs can be functionalized through targeted gene modification to facilitate neural repair by promoting neural differentiation, enhancing neurotrophic and neuroprotective functions, and increasing survival and homing abilities. The methods of gene transfer and selection of delivered genes still need to be optimized for improved therapeutic and targeting efficacies while minimizing the loss of MSC function. In this review, we focus on gene transport technologies for engineering MSCs and the application of strategies for selecting optimal delivery genes. Further, we describe the prospects and challenges of their application in animal models of different neurological lesions to broaden treatment alternatives for neurological diseases.