Incurable neurological disorders such as Parkinson's disease (PD), Huntington's disease (HD), and Alzheimer's disease (AD) are very common and can be life-threatening because of their progressive disease symptoms with limited treatment options. To provide an alternative renewable cell source for cell-based transplantation and as study models for neurological diseases, we generated induced pluripotent stem cells (iPSCs) from human dermal fibroblasts (HDFs) and then differentiated them into neural progenitor cells (NPCs) and mature neurons by dual SMAD signaling inhibitors. Reprogramming efficiency was improved by supplementing the histone deacethylase inhibitor, valproic acid (VPA), and inhibitor of p160-Rho associated coiled-coil kinase (ROCK), Y-27632, after retroviral transduction. We obtained a number of iPS colonies that shared similar characteristics with human embryonic stem cells in terms of their morphology, cell surface antigens, pluripotency-associated gene and protein expressions as well as their in vitro and in vivo differentiation potentials. After treatment with Noggin and SB431542, inhibitors of the SMAD signaling pathway, HDF-iPSCs demonstrated rapid and efficient differentiation into neural lineages. Six days after neural induction, neuroepithelial cells (NEPCs) were observed in the adherent monolayer culture, which had the ability to differentiate further into NPCs and neurons, as characterized by their morphology and the expression of neuron-specific transcripts and proteins. We propose that our study may be applied to generate neurological disease patient-specific iPSCs allowing better understanding of disease pathogenesis and drug sensitivity assays.