Human adipose-derived stem cells (hADSCs) are increasingly presumed to be a prospective stem cell source for cell replacement therapy in various degenerative and/or traumatic diseases. The potential of trans-differentiating hADSCs into motor neuron cells indisputably provides an alternative way for spinal cord injury (SCI) treatment. In the present study, a stepwise and efficient hADSC trans-differentiation protocol with retinoic acid (RA), sonic hedgehog (SHH), and neurotrophic factors were developed. With this protocol hADSCs could be converted into electrophysiologically active motoneuron-like cells (hADSC-MNs), which expressed both a cohort of pan neuronal markers and motor neuron specific markers. Moreover, after being primed for neuronal differentiation with RA/SHH, hADSCs were transplanted into SCI mouse model and they survived, migrated, and integrated into injured site and led to partial functional recovery of SCI mice. When ablating the transplanted hADSC-MNs harboring HSV-TK-mCherry overexpression system with antivirial Ganciclovir (GCV), functional relapse was detected by motor-evoked potential (MEP) and BMS assays, implying that transplanted hADSC-MNs participated in rebuilding the neural circuits, which was further confirmed by retrograde neuronal tracing system (WGA). GFP-labeled hADSC-MNs were subjected to whole-cell patch-clamp recording in acute spinal cord slice preparation and both action potentials and synaptic activities were recorded, which further confirmed that those pre-conditioned hADSCs indeed became functionally active neurons in vivo. As well, transplanted hADSC-MNs largely prevented the formation of injury-induced cavities and exerted obvious immune-suppression effect as revealed by preventing astrocyte reactivation and favoring the secretion of a spectrum of anti-inflammatory cytokines and chemokines. Our work suggests that hADSCs can be readily transformed into MNs in vitro, and stay viable in spinal cord of the SCI mouse and exert multi-therapeutic effects by rebuilding the broken circuitry and optimizing the microenvironment through immunosuppression.