We investigated the therapeutic potential of mouse ESCderived gamma-amino butyric acid (GABA)ergic neurons ($74% of total neurons in vitro) to reduce neuropathic pain following spinal cord injury (SCI) in rats. Spinal cord hemisection at the T13 segment, which is used as a rat SCI pain model, induced tactile hypersensitivity of the hind paw, as evidenced by decreased paw withdrawal thresholds in response to von Frey filaments, and also induced hyperexcitability of wide dynamic range neurons in the lumbar spinal cord in response to natural cutaneous stimuli. At 2 weeks posthemisection, GABAergic neurons (500,000 cells) were transplanted into the subarachnoid space of the spinal lumbar enlargement via a modified lumbar puncture technique. The transplantation of GABAergic neurons led to long-term attenuation of hemisection-induced tactile hypersensitivity and neuronal hyperexcitability as compared with vehicle-treated controls. These attenuations were reversed by the application of bicuculline and CGP52432, GABA-A and GABA-B receptor antagonists, respectively, but not by application of the serotonergic receptor antagonist methylsergide, indicating a specific restoration of spinal GABAergic inhibition. Histological data from sections of the lumbar cord in grafts demonstrated that 43.5% of surviving engrafted cells were neurons and located densely in the lower-medial portion of the dorsal funiculi in the spinal white matter. Among the observed neurons, 26.2% were GABAergic. The results suggest that subarachnoid transplantation of ESC-derived GABAergic neurons appear to restore spinal GABAergic inhibitory tone and can be a promising strategy to treat SCI-induced pain.