Neurotrophins, such as brain-derived neurotrophic factor (BDNF), are important in modulating neuroplasticity and promoting recovery after spinal cord injury. Intrathecal delivery of BDNF enhances functional recovery following unilateral spinal cord hemisection (SH) at C2, a well-established model of incomplete cervical spinal cord injury. We hypothesized that localized delivery of BDNF-expressing mesenchymal stem cells (BDNF-MSCs) would promote functional recovery of rhythmic diaphragm activity after SH. In adult rats, bilateral diaphragm electromyographic (EMG) activity was chronically monitored to determine evidence of complete SH at 3 days post-injury, and recovery of rhythmic ipsilateral diaphragm EMG activity over time post-SH. Wild-type, bone marrow-derived MSCs (WT-MSCs) or BDNF-MSCs (2 · 10 5 cells) were injected intraspinally at C2 at the time of injury. At 14 days post-SH, green fluorescent protein (GFP) immunoreactivity confirmed MSCs presence in the cervical spinal cord. Functional recovery in SH animals injected with WT-MSCs was not different from untreated SH controls (n = 10; overall, 20% at 7 days and 30% at 14 days). In contrast, functional recovery was observed in 29% and 100% of SH animals injected with BDNF-MSCs at 7 days and 14 days post-SH, respectively (n = 7). In BDNF-MSCs treated SH animals at 14 days, root-mean-squared EMG amplitude was 63 -16% of the pre-SH value compared with 12 -9% in the control/WT-MSCs group. We conclude that localized delivery of BDNF-expressing MSCs enhances functional recovery of diaphragm muscle activity following cervical spinal cord injury. MSCs can be used to facilitate localized delivery of trophic factors such as BDNF in order to promote neuroplasticity following spinal cord injury.