Although amniotic fluid cells can differentiate into several mesenchymal lineages and have been proposed as a valuable therapeutic cell source, their ability to undergo terminal neuronal differentiation remains a cause of controversy. The aim of this study was to investigate the neuronal differentiation ability of the c-Kit-positive population from GFP-transgenic rat amniotic fluid, amniotic fluid stem (AFS) cells, and to assess how they affected injury response in avian embryos. AFS cells were found to express several neural stem/progenitor cell markers. However, no overt neuronal differentiation was apparent after either treatment with small molecules known to stimulate neuronal differentiation, attempts to differentiate AFS cell-derived embryoid body-like structures, or grafting AFS cells into environments known to support neuronal differentiation (organotypic rat hippocampal cultures, embryonic chick nervous system). Nonetheless, AFS cells significantly reduced hemorrhage and increased survival when grafted at the site of an extensive thoracic crush injury in E2.5 chick embryos. Increased embryo survival was induced neither by desmopressin treatment, which also reduced hemorrhage, nor by grafting other mesenchymal or neural cells, indicating a specific effect of AFS cells. This was found to be mediated by soluble factors in a transwell coculture model. Altogether, this study shows that AFS cells reduce tissue damage and increase survival in injured embryos, providing a potentially valuable tool as therapeutic agents for tissue repair, particularly prenatal/perinatal repair of defects diagnosed during gestation, but this effect is mediated via paracrine mechanisms rather than the ability of AFS cells to fully differentiate into neuronal cells.