Cell transplantation is a realistic potential therapy for replacement of auditory sensory neurons and could benefit patients with cochlear implants or acoustic neuropathies. The procedure involves many experimental variables, including the nature and conditioning of donor cells, surgical technique and degree of degeneration in the host tissue. It is essential to control these variables in order to develop cell transplantation techniques effectively. We have characterized a conditionally immortal, mouse cell line suitable for transplantation to the auditory nerve. Structural and physiological markers defined the cells as early auditory neuroblasts that lacked neuronal, voltage-gated sodium or calcium currents and had an undifferentiated morphology. When transplanted into the auditory nerves of rats in vivo, the cells migrated peripherally and centrally and aggregated to form coherent, ectopic 'ganglia'. After 7 days they expressed beta 3-tubulin and adopted a similar morphology to native spiral ganglion neurons. They also developed bipolar projections aligned with the host nerves. There was no evidence for uncontrolled proliferation in vivo and cells survived for at least 63 days. If cells were transplanted with the appropriate surgical technique then the auditory brainstem responses were preserved. We have shown that immortal cell lines can potentially be used in the mammalian ear, that it is possible to differentiate significant numbers of cells within the auditory nerve tract and that surgery and cell injection can be achieved with no damage to the cochlea and with minimal degradation of the auditory brainstem response.