Currently there are no effective treatments targeting residual anatomical and behavioral deficits resulting from stroke. Evidence suggests that cell transplantation therapy may enhance functional recovery after stroke through multiple mechanisms. We used a syngeneic model of neural transplantation to explore graft-host communications that enhance cellular engraftment.The medial ganglionic eminence (MGE) cells were derived from 15-day-old transgenic rat embryos carrying green fluorescent protein (GFP), a marker, to easily track the transplanted cells. Adult rats were subjected to transient intraluminal occlusion of the medial cerebral artery. Two weeks after stroke, the grafts were deposited into four sites, along the rostro-caudal axis and medially to the stroke in the penumbra zone. Control groups included vehicle and fibroblast transplants. Animals were subjected to motor behavioral tests at 4 week posttransplant survival time. Morphological analysis demonstrated that the grafted MGE cells differentiated into multiple neuronal subtypes, established synaptic contact with host cells, increased the expression of synaptic markers, and enhanced axonal reorganization in the injured area. Initial patch-clamp recording demonstrated that the MGE cells received postsynaptic currents from host cells. Behavioral analysis showed reduced motor deficits in the rotarod and elevated body swing tests. These findings suggest that graft-host interactions influence the fate of grafted neural precursors and that functional recovery could be mediated by neurotrophic support, new synaptic circuit elaboration, and enhancement of the stroke-induced neuroplasticity.