We report here protection against rotenone-induced behavioural dysfunction, striatal dopamine depletion and nigral neuronal loss, following intra-striatal transplantation of neurons differentiated from murine embryonic stem cells (mES). mES maintained in serum free medium exhibited increase in neuronal, and decrease in stem cell markers by 7th and 10th days as revealed by RT-PCR and immunoblot analyses. Tyrosine hydroxylase, NURR1, PITX3, LMX1b and c-RET mRNA showed a significant higher expression in differentiated cells than in mES. Dopamine level was increased by 3-fold on 10th day as compared to 7 days differentiated cells. Severity of rotenone-induced striatal dopamine loss was attenuated, and amphetamine-induced unilateral rotations were significantly reduced in animals transplanted with 7 days differentiated cells, but not in animals that received undifferentiated ES transplant. However, the ratio of contralateral to ipsilateral swings in elevated body swing test was significantly reduced in both the transplanted groups, as compared to control. Striatal grafts exhibited the presence of tyrosine hydroxylase positive cells, and the percentage of dopaminergic neurons in the substantia nigra was also found to be higher in the ipsilateral side of 7 days and mES grafted animals. Increased expression of CD11b and IBA-1, suggested a significant contribution of these microglia-derived factors in controlling the limited survival of the grafted cells. Astrocytosis in the grafted striatum, and significant increase in the levels of glial cell line derived neurotrophic factor may have contributed to the recovery observed in the hemiparkinsonian rats following transplantation.