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Brain insults with progressive neurodegeneration are inherent in pathological symptoms that represent many psychiatric illnesses. Neural network disruptions characterized by impaired neurogenesis have been recognized to precede, accompany, and possibly even exacerbate the evolution and progression of symptoms of psychiatric disorders. Here, we focus on the neurodegeneration and the resulting psychiatric symptoms observed in fetal alcohol spectrum disorder and epilepsy, in an effort to show that these two diseases are candidate targets for stem cell therapy. In particular, we provide preclinical evidence in the transplantation of neural stem cells (NSCs) in both conditions, highlighting the potential of this cell-based treatment for correcting the psychiatric symptoms that plague these two disorders. Additionally, we discuss the challenges of NSC transplantation and offer insights into the mechanisms that may mediate the therapeutic benefits and can be exploited to overcome the hurdles of translating this therapy from the laboratory to the clinic. Our ultimate goal is to advance stem cell therapy for the treatment of psychiatric disorders.