Embryonic stem (ES) cells are expected to be a potential donor source for neural transplantation. We have obtained motoneuron-enriched neural progenitor cells by culturing mouse ES cells with retinoic acid (RA). The cells also expressed mRNA of a neurotrophic factor, neurotrophin-3 (NT-3). The left motor cortex area of mice was damaged by cryogenic brain injury, and the neural cells were transplanted underneath the injured motor cortex, neighboring to the paraventricular region. We found that the cells expressing neuronal phenotypes not only remained close to the implantation site, but also exhibited substantial migration penetrating into the damaged lesion, in a seemingly directed manner up to cortical region. We found that some of the neural cells differentiated into Islet1-positive motoneurons. It seems likely that the ability of the ES cell-derived neural progenitor cells to respond in vivo to guidance cues and signals that can direct their migration and differentiation may contribute to functional recovery of the recipient mice. We found that an "island of the mature neuronal cells" of recipient origin emerged in the damaged motor cortex. This may be associated with the neuroprotective effects of the ES cell-derived neural cells. The ES cells differentiated into CD31+ vasculoendothelial cells with the RA treatment in vitro. Furthermore, the grafted cells may provide sufficient neurotrophic factors such as NT-3 for neuroprotection and regeneration. The grafted neural cells that migrated into residual cortex and differentiated into neurons had purposefully elongated axons that were stained with anti-neurofilament middle chain (NFM) antibody. Our study suggests that motoneurons can be induced from ES cells, and ES cells become virtually an unlimited source of cells for experimental and clinical neural cell transplantation.