Stem cells, through their ability to both self-renew and differentiate, can produce a virtually limitless supply of specialized cells that behave comparably to primary cells. We took advantage of this property to develop an assay for small-molecule-based neuroprotection using stem-cell-derived motor neurons and astrocytes, together with activated microglia as a stress paradigm. Here, we report on the discovery of hit compounds from a screen of more than 10,000 small molecules. These compounds act through diverse pathways, including the inhibition of nitric oxide production by microglia, activation of the Nrf2 pathway in microglia and astrocytes, and direct protection of neurons from nitric-oxide-induced degeneration. We confirm the activity of these compounds using human neurons. Because microglial cells are activated in many neurological disorders, our hit compounds could be ideal starting points for the development of new drugs to treat various neurodegenerative and neurological diseases.