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Transplantation of embryonic stem (ES) cells may provide cures for the damaged nervous system. Pre-differentiated ES or neuronal precursor cells have been investigated in various animal models of neurodegenerative diseases including traumatic brain injury (TBI). To our knowledge, no study has yet examined the effects of undifferentiated, murine ES cells on functional recovery and tumorigenity following implantation into injured rat brains. We evaluated the effect of transplantation of undifferentiated, murine embryonic cells on the recovery of motor function following lateral fluid percussion brain injury in Sprague-Dawley rats. At 3 days post-injury, animals received stereotactic injections of either embryonic stem cell suspension or injections of phosphate buffered saline without cells (control) into the injured cortex. Neurological motor function assessments were performed before injury, 72 h, 1, 3, and 6 weeks after transplantation using a Rotatrod and a Composite Neuroscore test. During this time period brain injured animals receiving ES cell transplantation showed a significant improvement in the Rotarod Test and in the Composite Neuroscore Test as compared to phosphate buffered saline (PBS)-treated animals. At 1 week post-transplantation, ES cells were detectable in 100% of transplanted animals. At 7 weeks following transplantation, EScells were detectable in only one animal. Two of 10 xenotransplanted animals revealed tumor formation over the observation period. These findings provide evidence for therapeutic potency of embryonic stem cell transplantation after TBI in rat, but also raise serious safety concerns about the use of such cells in human.