Stem cell transplantation promises new hope for the treatment of stroke although significant questions remain about how the grafted cells elicit their effects. One hypothesis is that transplanted stem cells enhance endogenous repair mechanisms activated after cerebral ischaemia. Recognizing that bilateral reorganization of surviving circuits is associated with recovery after stroke, we investigated the ability of transplanted human neural progenitor cells to enhance this structural plasticity. Our results show the first evidence that human neural progenitor cell treatment can significantly increase dendritic plasticity in both the ipsi- and contralesional cortex and this coincides with stem cell-induced functional recovery. Moreover, stem cell-grafted rats demonstrated increased corticocortical, corticostriatal, corticothalamic and corticospinal axonal rewiring from the contralesional side; with the transcallosal and corticospinal axonal sprouting correlating with functional recovery. Furthermore, we demonstrate that axonal transport, which is critical for both proper axonal function and axonal sprouting, is inhibited by stroke and that this is rescued by the stem cell treatment, thus identifying another novel potential mechanism of action of transplanted cells. Finally, we established in vitro co-culture assays in which these stem cells mimicked the effects observed in vivo. Through immunodepletion studies, we identified vascular endothelial growth factor, thrombospondins 1 and 2, and slit as mediators partially responsible for stem cell-induced effects on dendritic sprouting, axonal plasticity and axonal transport in vitro. Thus, we postulate that human neural progenitor cells aid recovery after stroke through secretion of factors that enhance brain repair and plasticity.