Differentiation of pluripotent neural stem cells engrafted into the adult normal and injured spinal cord is restricted to the glial lineage, suggesting that in vitro induction toward a neuronal lineage prior to transplantation and/or modification of the host environment may be necessary to initiate and increase the differentiation of neurons. In the present study, we investigated the differentiation of neuronal-restricted precursors (NRPs) grafted into the normal and contused adult rat spinal cord. NRPs proliferated through multiple passages in the presence of FGF2 and NT3 and differentiated into only neurons in vitro in the presence of retinoic acid and the absence of FGF2. Differentiated NRPs expressed GABA, glycine, glutamate, and ChAT. Two weeks to 2 months after engraftment of undifferentiated NRPs into adult normal spinal cord, large numbers of surviving cells were seen in all of the animals. The majority differentiated into βIII-tubulin-positive neurons. Some transplanted NRPs expressed GABA and small numbers were glutamate- and ChAT-positive. NRPs were also transplanted into the epicenter of the contused adult rat spinal cord. Two weeks to 2 months after transplantation, some engrafted NRPs remained undifferentiated nestin-positive cells. Small numbers were MAP2- or βIII-tubulin-positive neurons. However, the expression of GABA, glutamate, or ChAT was not observed. These results show that NRPs can differentiate into different types of neurons in the normal adult rat spinal cord, but that such differentiation is inhibited in the injured spinal cord. Manipulation of the microenvironment in the injured spinal cord will likely be necessary to facilitate neuronal replacement.