The present invention provides a method of increasing neural stem cell numbers or neurogenesis by using prolactin. The method can be practiced in vivo to obtain more neural stem cells in situ, which can in turn produce more neurons or glial cells to compensate for lost or dysfunctional neural cells. The method can also be practiced in vitro to produce a large number of neural stem cells in culture. The cultured stem cells can be used, for example, for transplantation treatment of patients or animals suffering from neurodegenerative diseases or conditions. In addition, since neural stem cells are a source for olfactory neurons, the present invention also provides methods of increasing olfactory neurons and enhancing olfactory functions.