Recent studies have shown evidence of behavioral recovery after transplantation of human pluripotent stem cell (PSC)-derived neural cells in animal models of neurological disease. However, little is known about the mechanisms underlying graft function. Here we use optogenetics to modulate in real time electrophysiological and neurochemical properties of mesencephalic dopaminergic (mesDA) neurons derived from human embryonic stem cells (hESCs). In mice that had recovered from lesion-induced Parkinsonian motor deficits, light-induced selective silencing of graft activity rapidly and reversibly re-introduced the motor deficits. The re-introduction of motor deficits was prevented by the dopamine agonist apomorphine. These results suggest that functionality depends on graft neuronal activity and dopamine release. Combining optogenetics, slice electrophysiology and pharmacological approaches, we further show that mesDA-rich grafts modulate host glutamatergic synaptic transmission onto striatal medium spiny neurons in a manner reminiscent of endogenous mesDA neurons. Thus, application of optogenetics in cell therapy can link transplantation, animal behavior and postmortem analysis to enable the identification of mechanisms that drive recovery.