Fibroblasts were genetically modified to secrete nerve growth factor (NGF) by infection with a retroviral vector and then implanted into the brains of rats that had surgical lesions of the fimbria-fornix. The grafted cells survived and produced sufficient NGF to prevent the degeneration of cholinergic neurons that would die without treatment. In addition, the protected cholinergic cells sprouted axons that projected in the direction of the cellular source of NGF. These results indicate that a combination of gene transfer and intracerebral grafting may provide an effective treatment for some disorders of the central nervous system.