Embryonic stem (ES) cells have been investigated in many animal models of injury and disease. However, few studies have examined the ability of pre-differentiated ES cells to improve functional outcome following traumatic brain injury (TBI). The purpose of the present study was to compare the effect of murine ES cells that were pre-differentiated into GABAergic neurons or astrocytes on functional recovery following TBI. Neural and astrocyte induction was achieved by co-culturing ES cells on a bone marrow stromal fibroblast (M2-10B4) feeder layer and incubating them with various mitogenic factors. Rats were initially prepared with a unilateral controlled cortical contusion injury of the sensorimotor cortex or sham procedure. Rats were transplanted 7 days following injury with ∼100K GABAergic neurons, astrocytes, fibroblasts, or media. Animals were assessed on a battery of sensorimotor tasks following transplantation. The stromal fibroblast cells (M2-10B4), as a control cell line, did not differ significantly from media infusions. Transplantation of GABAergic neurons facilitated complete and total recovery on the vibrissae-forelimb placing test as opposed to all other groups, which failed to show any recovery. It was also found that GABAergic neurons reduced the magnitude of the initial impairment on the limb use test. Histological analysis revealed infiltration of host brain with transplanted neurons and astrocytes. The results of the present study suggest that transplantation of pre-differentiated GABAergic neurons significantly induces recovery of sensorimotor function; whereas, astrocytes do not.