Neural progenitor cells, including neural stem cells, are a potential expandable source of graft material for transplantation aimed at repairing the damaged CNS. Here we present the first evidence that in vitro‐expanded fetus‐derived neurosphere cells were able to generate neurons in vivo and improve motor function upon transplantation into an adult rat spinal‐cord‐contusion injury model. As the source of graft material, we used a neural stem cell‐enriched population that was derived from rat embryonic spinal cord (E14.5) and expanded in vitro by neurosphere formation. Nine days after contusion injury, these neurosphere cells were transplanted into adult rat spinal cord at the injury site. Histological analysis 5 weeks after the transplantation showed that mitotic neurogenesis occurred from the transplanted donor progenitor cells within the adult rat spinal cord, a nonneurogenic region; that these donor‐derived neurons extended their processes into the host tissues; and that the neurites formed synaptic structures. Furthermore, analysis of motor behavior using a skilled reaching task indicated that the treated rats showed functional recovery. These results indicate that in vitro‐expanded neurosphere cells derived from the fetal spinal cord are a potential source for transplantable material for treatment of spinal cord injury. © 2002 Wiley‐Liss, Inc.