Induced pluripotent stem cell-derived neural progenitor cells (iPSC-NPCs) are a promising source of tailor-made cell therapy for neurological diseases. However, major obstacles to clinical use still exist. To circumvent complications related to intracerebral administration, we implanted human iPSC-NPCs epidurally over the peri-infarct cortex 7 days after permanent middle cerebral artery occlusion in adult rats. Compared to controls, cell-treated rats showed significant improvements in paretic forelimb usage and grip strength from 10 days post-transplantation (dpt) onwards, as well as reductions in lesion volumes, inflammatory infiltration and astrogliosis at 21 dpt. Few iPSC-NPCs migrated into rat peri-infarct cortices and exhibited poor survival in tissue. To examine the paracrine therapeutic mechanisms of epidural iPSC-NPC grafts, we used transmembrane co-cultures of human iPSC-NPCs with rat cortical cells subjected to oxygen-glucose deprivation. Compared to other human stem cells, iPSC-NPCs were superior at promoting neuronal survival and outgrowth, and mitigating astrogliosis. Using comparative whole-genome microarrays and cytokine neutralization, we identified a neurorestorative secretome from iPSC-NPCs, and neutralizing enriched cytokines abolished neuroprotective effects in co-cultures. This proof-of-concept study demonstrates a relatively safe, yet effective epidural route for delivering human iPSC-NPCs, which acts predominately through discrete paracrine effects to promote functional recovery after stroke.