Inhibitory interneurons regulate the oscillatory rhythms and network synchrony that are required for cognitive functions and disrupted in Alzheimer's disease (AD). Network dysrhythmias in AD and multiple neuropsychiatric disorders are associated with hypofunction of Nav1.1, a voltage-gated sodium channel subunit predominantly expressed in interneurons. We show that Nav1.1-overexpressing, but not wild-type, interneuron transplants derived from the embryonic medial ganglionic eminence (MGE) enhance behavior-dependent gamma oscillatory activity, reduce network hypersynchrony, and improve cognitive functions in human amyloid precursor protein (hAPP)-transgenic mice, which simulate key aspects of AD. Increased Nav1.1 levels accelerated action potential kinetics of transplanted fast-spiking and non-fast-spiking interneurons. Nav1.1-deficient interneuron transplants were sufficient to cause behavioral abnormalities in wild-type mice. We conclude that the efficacy of interneuron transplantation and the function of transplanted cells in an AD-relevant context depend on their Nav1.1 levels. Disease-specific molecular optimization of cell transplants may be required to ensure therapeutic benefits in different conditions.