Hypoxic-ischemic encephalopathy is one of the main causes of neurological disabilities. It has been reported that the infarcted area can be reduced by injection of glial cell line-derived neurotrophic factor (GDNF) into the brain parenchyma after a hypoxic/ischemic insult in neonatal rats. We have shown that GDNF is expressed in neuronal and non-neuronal cells throughout all regions of the developing rat brain. We developed a system for the delivery of a constant supply of glial cell line-derived neurotrophic factor to the brain via implantation of GDNF secreting cells directly into the brain parenchyma. The aim of this study was to examine the neuroprotective effect of GDNF using this delivery system. We implanted a capsule containing GDNF secreting cells in 7 day old Wistar rats, and two days later, they underwent hypoxic-ischemic stress. The capsule provided strong neurological protection, as indicated by a reduction in the infarcted area and the severity of histological damage in the treated group compared with controls. We then investigated whether this new delivery method improved the long time learning and memory disability caused by hypoxic-ischemic stress. We examined the effect of implantation of the cells on three tasks:1) eight arm radial maze task for short memory; 2) choice reaction time task for reference memory; and 3) water maze task for long term memory. In all of the three tasks, implantation of the GDNF capsule improved learning and memory disability. Glial cell line-derived neurotrophic factor treatment is effective not only in reducing brain damage but also in preventing learning and memory impairment following hypoxic-ischemic insult in neonatal rats.