We have previously demonstrated that amniotic epithelial cells (AECs) can enhance survival and neural differentiation of neural stem cells (NSCs) when co-cultured in basal media. In addition, the presence of basic fibroblast growth factor (bFGF) enhances this AEC function. The aim of the present study was to extend those findings and investigate whether AECs modified with the bFGF gene will also enhance NSCs survival and neural differentiation in vivo and promote repair of the injured spinal cord. Female Wistar rats were used for a contusive spinal cord injury (SCI) model. Contusive SCIs were induced using a weight-drop device at levels T9–T11. Seven days following contusion, rats received grafts of NSCs only, NSCs with AECs/pLEGFP-hbFGF, or NSCs with AECs/pLEGFP-C1 into the injured region. Significant locomotor improvement was observed in the NSCs/AECs co-graft group beginning at 3 weeks compared with the NSCs or NaCl only groups. These results were confirmed and extended in an electrophysiological analysis. An immunohistological analysis revealed that AECs/pLEGFP-hbFGF promoted the survival (vs NaCl group: 194 ± 9.17 vs 103.6 ± 13.05) and neural differentiation (vs NaCl group: 14.24 ± 1.11 vs 7 ± 0.63) of co-transplanted NSCs. We also confirmed that AECs could promote the survival of host neurons. These results suggest that AECs/pLEGFP-hbFGF improve the NSCs survival and differentiation microenvironment and may be useful as a source of sustained trophic supported to improve NSCs differentiation into neurons in vivo. These findings suggest that a cograft of AECs/pLEGFP-hbFGF and NSCs may have benefits for SCI.