We sought to evaluate the potential of C17.2 neural progenitor cells (NPCs) engineered to secrete glial cell line-derived neurotrophic factor (GDNF) to survive, differentiate and promote functional recovery following engraftment into the brains of adult male Sprague-Dawley rats subjected to lateral fluid percussion brain injury. First, we demonstrated continued cortical expression of GDNF receptor components (GFRalpha-1, c-Ret), suggesting that GDNF could have a physiological effect in the immediate post-traumatic period. Second, we demonstrated that GDNF over-expression reduced apoptotic NPC death in vitro. Finally, we demonstrated that GDNF over-expression improved survival, promoted neuronal differentiation of GDNF-NPCs at 6 weeks, as compared with untransduced (MT) C17.2 cells, following transplantation into the perilesional cortex of rats at 24 h post-injury, and that brain-injured animals receiving GDNF-C17.2 transplants showed improved learning compared with those receiving vehicle or MT-C17.2 cells. Our results suggest that transplantation of GDNF-expressing NPCs in the acute post-traumatic period promotes graft survival, migration, neuronal differentiation and improves cognitive outcome following traumatic brain injury.