Incomplete regeneration and restoration of function in damaged nerves is a major clinical challenge. In this regard, stem cells hold much promise in nerve-tissue engineering, with advantages such as prevention of scar-tissue ingrowth and guidance of axonal regrowth. Engineering three-dimensional and patterned microenvironments using biomaterials with chemical and mechanical characteristics close to those of normal nervous tissue has enabled new approaches for guided differentiation of various stem cells toward neural cells and possible treatment of neurodegenerative diseases such as Alzheimer's, Parkinson's, and Huntington's diseases. Differentiation of stem cells in a neurogenic lineage is largely affected by the signals from surrounding microenvironment (niche). The stem cell niche refers to a specific microenvironment around the stem cells, which provides specific biochemical (soluble factors) and biophysical signals (topography, electrical and mechanical). This specified niche regulates the stem cells' behavior and fate. While the role of chemical cues in neural differentiation is well appreciated, recently, the cues presented by the physical microenvironment are increasingly documented to be important regulators of nerve cell differentiation. The single and synergistic effects of surface topography and electrical signals on neural differentiation of stem cells are reviewed.