Despite intense study, the precise origin and cell lineage of microglia, the resident mononuclear phagocytes of the nervous system, are still a matter for debate. Unlike macroglia (astrocytes and oligodendrocytes) and neurons, which are derived from neuroectoderm, microglial progenitors arise from peripheral mesodermal (myeloid) tissue. The view still commonly held is that tissue-resident mononuclear phagocytes (including microglia) are derived from circulating blood monocytes and these take up residence late in gestation and postnatally. However, microglial progenitors colonise the nervous system primarily during embryonic and fetal periods of development. Recent evidence indicates differences between the lineage of mononuclear phagocytes during the embryonic and fetal period from that in the neonate and adult-mononuclear phagocytes that take up residence within tissues are derived from a lineage of myeloid cells that is independent of the monocyte lineage. Our own findings on the development and differentiation of microglial progenitors, taken together with findings by other investigators, and in the context of the heterogeneity between myeloid differentiation in the fetus and in the adult, support the view that microglia are derived prenatally from mesodermal progenitors that are distinct from monocytes. Furthermore, microglial progenitors colonise the nervous system via extravascular routes initially. These findings challenge the concept that resident microglia in the nervous system are derived from circulating blood monocytes. Work is still underway to establish the tissue of origin and lineage of microglial progenitors in vivo. This information is critical not only from a developmental perspective, but significantly from a therapeutic viewpoint, as (i) the unique property of microglial progenitors to colonise the nervous system from the periphery allows these cells to be exploited as a biological and non-invasive means for cell therapy by delivering genes to the nervous system (microglial engraftment), and (ii) there are indications that microglial progenitors are specifically able to home to the nervous system. Use of microglial progenitors for therapeutic purposes becomes feasible only if the origin and cell lineage of these microglial progenitors are known and these cells can be isolated and manipulated in vitro (i.e., to express specific trophic factors) prior to therapeutic transfer (e.g., intravenously) in vivo. In this paper, we shall briefly consider the existing concepts on the origin and lineage of microglial progenitors and discuss new hypotheses in the light of emerging data that suggest clear differences between fetal and adult ontogeny of myeloid cells.