Transplantation of neural stem cells (NSC) into lesioned spinal cord offers the potential to increase regeneration by replacing lost neurons or oligodendrocytes. The majority of transplanted NSC, however, typically differentiate into astrocytes that may exacerbate glial scar formation. Here we show that blocking of ciliary neurotrophic factor (CNTF) with anti-CNTF antibodies after NSC transplant into spinal cord injury (SCI) resulted in a reduction of glial scar formation by 8 weeks. Treated animals had a wider distribution of transplanted NSC compared with the control animals. The NSC around the lesion coexpressed either nestin or markers for neurons, oligodendrocytes, or astrocytes. Approximately 20% fewer glial fibrillary acidic protein-positive/bromodeoxyuridine (BrdU)-positive cells were seen at 2, 4, and 8 weeks postgrafting, compared with the control animals. Furthermore, more CNPase(+)/BrdU(+) cells were detected in the treated group at 4 and 8 weeks. These CNPase(+) or Rip(+) mature oligodendrocytes were seen in close proximity to host corticospinal tract (CST) and 5HT(+) serotonergic axon. We also demonstrate that the number of regenerated CST fibers both at the lesion and at caudal sites in treated animals was significantly greater than that in the control animals at 8 weeks. We suggest that the blocking of CNTF at the beginning of SCI provides a more favorable environment for the differentiation of transplanted NSC and the regeneration of host axons.