Great interest exists in using cell replacement strategies to repair the damaged central nervous system. Previous studies have shown that grafting rat fetal spinal cord into neonate or adult animals after spinal cord injury leads to improved anatomic growth/plasticity and functional recovery. It is clear that fetal tissue transplants serve as a scaffold for host axon growth. In addition, embryonic Day 14 (E14) spinal cord tissue transplants are also a rich source of neural-restricted and glial-restricted progenitors. To evaluate the potential of E14 spinal cord progenitor cells, we used in vitro-expanded neurospheres derived from embryonic rat spinal cord and showed that these cells grafted into lesioned neonatal rat spinal cord can survive, migrate, and differentiate into neurons and oligodendrocytes, but rarely into astrocytes. Synapses and partially myelinated axons were detected within the transplant lesion area. Transplanted progenitor cells resulted in increased plasticity or regeneration of corticospinal and brainstem-spinal fibers as determined by anterograde and retrograde labeling. Furthermore, transplantation of these cells promoted functional recovery of locomotion and reflex responses. These data demonstrate that progenitor cells when transplanted into neonates can function in a similar capacity as transplants of solid fetal spinal cord tissue.