Olfactory ensheathing cells (OECs) prepared from the olfactory bulbs of adult transgenic Sprague Dawley (SD) rats expressing green fluorescent protein (GFP) were transplanted into a dorsal spinal cord transection lesion of SD rats. Five weeks after transplantation, the cells survived within the lesion zone and oriented longitudinally along axons that bridged the transection site. Although the highest density of GFP cells was within the lesion zone, some cells distributed longitudinally outside of the lesion area. Myelinated axons spanning the lesion were observed in discrete bundles encapsulated by a cellular element. Electron micrographs of spinal cords immunostained with an anti-GFP antibody indicated that a majority of the peripheral-like myelinated axons were derived from donor OECs. Open-field locomotor behavior was significantly improved in the OEC transplantation group. Thus, transplanted OECs derived from the adult olfactory bulb can survive and orient longitudinally across a spinal cord transection site and form myelin. This pattern of repair is associated with improved locomotion.