Chemotactic cytokines (chemokines) have been traditionally defined as small (10–14kDa) secreted leukocyte chemoattractants. However, chemokines and their cognate receptors are constitutively expressed in the central nervous system (CNS) where immune activities are under stringent control. Why and how the CNS uses the chemokine system to carry out its complex physiological functions has intrigued neurobiologists. Here, we focus on chemokine CXCL12 and its receptor CXCR4 that have been widely characterized in peripheral tissues and delineate their main functions in the CNS. Extensive evidence supports CXCL12 as a key regulator for early development of the CNS. CXCR4 signaling is required for the migration of neuronal precursors, axon guidance/pathfinding and maintenance of neural progenitor cells (NPCs). In the mature CNS, CXCL12 modulates neurotransmission, neurotoxicity and neuroglial interactions. Thus, chemokines represent an inherent system that helps establish and maintain CNS homeostasis. In addition, growing evidence implicates altered expression of CXCL12 and CXCR4 in the pathogenesis of CNS disorders such as HIV-associated encephalopathy, brain tumor, stroke and multiple sclerosis (MS), making them the plausible targets for future pharmacological intervention.