Stem cell grafts have been advocated as experimental treatments for neurological diseases by virtue of their ability to offer trophic support for injured neurons and, theoretically, to replace dead neurons. Human embryonic stem cells (HESCs) are a rich source of neural precursors (NPs) for grafting, but have been questioned for their tendency to form tumors. Here we studied the ability of HESC-derived NP grafts optimized for cell number and differentiation stage prior to transplantation, to survive and stably differentiate and integrate in the basal forebrain (neostriatum) of young adult nude rats over long periods of time (6 months). NPs were derived from adherent monolayer cultures of HESCs exposed to noggin. After transplantation, NPs showed a drastic reduction in mitotic activity and an avid differentiation into neurons that projected via major white matter tracts to a variety of forebrain targets. A third of NP-derived neurons expressed the basal forebrain-neostriatal marker dopamine-regulated and cyclic AMP-regulated phosphoprotein. Graft-derived neurons formed mature synapses with host postsynaptic structures, including dendrite shafts and spines. NPs inoculated in white matter tracts showed a tendency toward glial (primarily astrocytic) differentiation, whereas NPs inoculated in the ventricular epithelium persisted as nestin(+) precursors. Our findings demonstrate the long-term ability of noggin-derived human NPs to structurally integrate tumor-free into the mature mammalian forebrain, while maintaining some cell fate plasticity that is strongly influenced by particular central nervous system (CNS) niches.