Diosgenin (DG), a well-known steroidal sapogenin, is present abundantly in medicinal herbs such as Dioscorea rhizome, Dioscorea villosa, Trigonella foenum-graecum, Smilax China, and Rhizoma polgonati. DG is utilized as a major starting material for the production of steroidal drugs in the pharmaceutical industry. Due to its wide range of pharmacological activities and medicinal properties, it has been used in the treatment of cancers, hyperlipidemia, inflammation, and infections. Numerous studies have reported that DG is useful in the prevention and treatment of neurological diseases. Its therapeutic mechanisms are based on the mediation of different signaling pathways, and targeting these pathways might lead to the development of effective therapeutic agents for neurological diseases. The present review mainly summarizes recent progress using DG and its derivatives as therapeutic agents for multiple neurological disorders along with their various mechanisms in the central nervous system. In particular, those related to therapeutic efficacy for Parkinson’s disease, Alzheimer’s disease, brain injury, neuroinflammation, and ischemia are discussed. This review article also critically evaluates existing limitations associated with the solubility and bioavailability of DG and discusses imperatives for translational clinical research. It briefly recapitulates recent advances in structural modification and novel formulations to increase the therapeutic efficacy and brain levels of DG. In the present review, databases of PubMed, Web of Science, and Scopus were used for studies of DG and its derivatives in the treatment of central nervous system diseases published in English until December 10, 2019. Three independent researchers examined articles for eligibility. A total of 150 articles were screened from the above scientific literature databases. Finally, a total of 46 articles were extracted and included in this review. Keywords related to glioma, ischemia, memory, aging, cognitive impairment, Alzheimer, Parkinson, and neurodegenerative disorders were searched in the databases based on DG and its derivatives.