Background: Spinal cord injury (SCI) is a common disease that results in motor and sensory disorders and even lifelong paralysis. The transplantation of stem cells, such as embryonic stem cells (ESCs), induced pluripotent stem cells (iPSCs), mesenchymal stem cells (MSCs), or subsequently generated stem/progenitor cells, is predicted to be a promising treatment for SCI. In this study, we aimed to investigate effect of human iPSC-derived neural stem cells (hiPSC-NSCs) and umbilical cord-derived MSCs (huMSCs) in a mouse model of acute SCI. Methods: Acute SCI mice model were established and were randomly treated as PBS (control group), repaired with 1×105 hiPSC-NSCs (NSC group), and 1×105 huMSCs (MSC group), respectively, in a total of 54 mice (n = 18 each). Hind limb motor function was evaluated in open-field tests using the Basso Mouse Scale (BMS) at days post-operation (dpo) 1, 3, 5 and 7 after spinal cord injury, and weekly thereafter. Spinal cord and serum samples were harvested at dpo 7, 14 and 21. HE staining and Masson staining were used to evaluate the morphological changes and fibrosis area. The differentiation of the transplanted cells in vivo was evaluated with immunohistochemical staining. Results: The hiPSC-NSC-treated group presented a significantly smaller GFAP+ area than MSC-treated mice at all time points. Additionally, MSC-transplanted mice had a similar GFAP+ area to mice receiving PBS. At dpo14, the immunostained hiPSC-NSCs were positive for SOX2. Furthermore, the transplanted hiPSC-NSCs differentiated into glial fibrillary acidic protein (GFAP)-positive astrocytes and beta-III tubulin-positive neurons, whereas the transplanted huMSCs differentiated into GFAP-positive astrocytes. In addition, hiPSC-NSC transplantation reduced fibrosis formation and the inflammation level. Compared with the control or huMSC transplanted group, the group with transplantation of hiPSC-NSCs exhibited significantly improved behaviours, particularly limb coordination. Conclusions: HiPSC-NSCs promote functional recovery in mice with acute SCI by replacing missing neurons and attenuating fibrosis, glial scar formation, and inflammation.