When human umbilical cord blood cells (HUCBCs) are administered intravenously after a middle cerebral artery occlusion, they reliably produce behavioral and anatomical recovery, and protect neural tissue from progressive change. However, our results indicate that the cells do not exert their effects by engraftment in the peri-infarct region, even though they migrate to the site of injury. The objective of the present study was to determine if the cells induce recovery by decreasing inflammation. We used a combination of in vivo and in vitro studies to show that HUCBCs decrease inflammation in the brain after stroke and thereby enhance neuroprotection. After stroke and transplantation, there was a decrease in CD45/CD11b- and CD45/B220-positive (+) cells. This decrease was accompanied by a decrease in mRNA and protein expression of pro-inflammatory cytokines and a decrease in nuclear factor kappaB (NF-kappaB) DNA binding activity in the brain of stroke animals treated with HUCBCs. In addition to modulating the inflammatory response, we demonstrate that the cord blood cells increase neuronal survival through non-immune mechanisms. Once thought of as "cell replacement therapy," we now propose that cord blood treatment in stroke reduces inflammation and provides neuroprotection. Both of these components are necessary for effective therapy.