To test the idea that genetically engineered cells can rescue axotomized neurons, we transplanted fibroblasts and immortalized neural stem cells (NSCs) modified to express neurotrophic factors into the injured spinal cord. The neurotrophin-3 (NT-3) or nerve growth factor (NGF) transgene was introduced into these cells using recombinant retroviral vectors containing an internal ribosome entry site (IRES) sequence and the β-galactosidase or alkaline phosphatase reporter gene. Bioassay confirmed biological activity of the secreted neurotrophic factors. Clarke's nucleus (CN) axons, which project to the rostral spinal cord and cerebellum, were cut unilaterally in adult rats by T8 hemisection. Rats received transplants of fibroblasts or NSCs genetically modified to express NT-3 or NGF and a reporter gene, only a reporter gene, or no transplant. Two months postoperatively, grafted cells survived at the hemisection site. Grafted fibroblasts and NSCs expressed a reporter gene and immunoreactivity for the NGF or NT-3 transgene. Rats receiving no transplant or a transplant expressing only a reporter gene showed a 30% loss of CN neurons in the L1 segment on the lesioned side. NGF-expressing transplants produced partial rescue compared with hemisection alone. There was no significant neuron loss in rats receiving grafts of either fibroblasts or NSCs engineered to express NT-3. We postulate that NT-3 mediates survival of CN neurons through interaction with trkC receptors, which are expressed on CN neurons. These results support the idea that NT-3 contributes to long-term survival of axotomized CN neurons and show that genetically modified cells rescue axotomized neurons as efficiently as fetal CNS transplants. J. Neurosci. Res. 65:549–564, 2001. © 2001 Wiley-Liss, Inc.