Recovery from central nervous system damage in adult mammals is hindered by their limited ability to replace lost cells and damaged myelin, and reestablish functional neural connections. However, recent progresses in stem cell biology are making it feasible to induce the regeneration of injured axons after spinal cord injury. Transplantation of in vitro expanded neural stem cells into rat spinal cord 9 days after contusion injury induced their differentiation into neurons and oligodendrocytes, and the functional recovery of skilled forelimb movement. It was partly because the microenvironment within the injured spinal cord at 9 days after injury was more favorable for grafted neural stem cells in terms of their survival and differentiation.