Neural precursor cell (NPC) transplantation is a promising strategy for treatment of CNS injuries and neurodegenerative disorders because of potential for cell replacement. An important element of future clinical applications is development of a non-invasive procedure to follow NPC fate. We show that neuronal-restricted precursors (NRPs) and glial-restricted precursors (GRPs), NPCs with lineage restrictions for neurons and glia, respectively, can be labeled in vitro with the superparamagnetic iron oxide contrast agent Feridex. Following engraftment into intact adult spinal cord, labeled cells robustly survived in white and gray matter and migrated selectively along white matter tracts up to 5 mm. Localization of cells was reliably established using ex vivo magnetic resonance imaging of spinal cords. Imaging coincided with histological detection of iron and the human alkaline phosphatase transgene in most grafting sites, including the stream of migrating cells. Following transplantation, magnetically labeled cells exhibited mature morphologies and differentiated into neurons, astrocytes, and oligodendrocytes, similar to grafts of unlabeled NRPs and GRPs. Interestingly, Feridex-labeled cells, but not unlabeled cells, induced influx of ED1-positive macrophages/microglia. Small numbers of these phagocytic cells took up iron from grafted cells, while the majority of Feridex label was found in transplanted cells. We conclude that Feridex labeling does not inhibit NPC differentiation and can be used to reliably localize NPCs by MRI following engraftment into adult CNS, with the possible exception of areas of rapidly proliferating cells. The present results are relevant for MR-guided clinical application of transplantation strategies in treatment of spinal cord injury and other CNS pathologies.