Transplants of fetal dopamine neurons can be used to restore dopamine neurotransmission in animal models of Parkinson’s disease, as well as in patients with advanced Parkinson’s disease. In these studies the cells are placed in the striatum rather than in the substantia nigra where they normally reside, which may limit their ability to achieve full restoration of motor function. Using a microtransplantation approach, which allows precise placement of small cell deposits directly into the host substantia nigra, and fetal donor cells that express green fluorescent protein under the control of the tyrosine hydroxylase promoter, we show that dopamine neuroblasts implanted into the substantia nigra of adult mice are capable of generating a new nigrostriatal pathway with an outgrowth pattern that matches the anatomy of the intrinsic system. This target-directed regrowth was closely aligned with the intrinsic striatonigral fibre projection and further enhanced by over-expression of glial cell line-derived neurotrophic factor in the striatal target. Results from testing of amphetamine-induced rotational behaviour suggest, moreover, that dopamine neurons implanted into the substantia nigra are also capable of integrating into the host circuitry at the functional level.