Experts from Heriot Watt University, along with those at St Andrews University, will work with their counterparts at Stanford University in the US.
The study will examine how to grow new stem cells to treat people with brain or spinal cord injuries, or those with conditions such as Parkinson’s disease.
The research also has the potential to regenerate damaged tissue and repair injuries caused by heart attacks and brain injuries caused by strokes.
First Minister Alex Salmond heard details of the work as he visited Stanford during a visit to the US.
Mr Salmond said the universities involved were “at the cutting-edge of scientific endeavour that could transform the lives of millions of people”.
He stated: “This research has the potential to lead to incredible medical breakthroughs that could not only give new hope to millions but contribute enormously to the economies of both Scotland and California.”