In this chapter, we describe an effective and reproducible protocol for neural differentiation of human pluripotent stem cells in three dimensional (3D) collagen and MartigelTM gels. We have used this protocol to generate embryoid bodies (EBs) from dissociated suspension cultures of human embryonic stem cells (hESCs) and induced pluripotent stem cells (hiPSCs) which are immobilized in 3D collagen or MartigelTM gels. The gel-entrapped EBs differentiated into robust Pax6+ neuroectodermal cells of neural rosettes in N2 neural-inducing medium, then into nestin+ neural progenitors and further differentiated into TuJ1+ neurons, GFAP+ astrocytes, and O4+ oligodendrocytes. This 3D neural differentiation model, derived from human ES and iPS cells, has potential applications in the study of early human embryonic development, drug screening, and cell therapy.