The most common type of spinal cord injury is the contusion of the spinal cord, which causes progressive secondary tissue degeneration. In this study, we applied genetically modified human neural stem cells overexpressing BDNF (brain-derived neurotrophic factor) (F3.BDNF) to determine whether they can promote functional recovery in the spinal cord injury (SCI) model in rats. We transplanted F3.BDNF cells via intrathecal catheter delivery after a contusion of the thoracic spinal cord and found that they were migrated toward the injured spinal cord area by MR imaging. Transplanted F3.BDNF cells expressed neural lineage markers, such as NeuN, MBP, and GFAP and were functionally connected to the host neurons. The F3.BDNF-transplanted rats exhibited significantly improved locomotor functions compared with the sham group. This functional recovery was accompanied by an increased volume of spared myelination and decreased area of cystic cavity in the F3.BDNF group. We also observed that the F3.BDNF-transplanted rats showed reduced numbers of Iba1- and iNOS-positive inflammatory cells as well as GFAP-positive astrocytes. These results strongly suggest the transplantation of F3.BDNF cells can modulate inflammatory cells and glia activation and also improve the hyperalgesia following SCI.