The fate of exogenous neural stem cells (NSCs) in the environment of the adult nervous system continues to be a matter of debate. In the present study, we report that cells of the murine NSC clone C17.2, when grafted into the lumbar segments of the spinal cord of adult rats, survive and undergo partial differentiation. C17.2 cells migrate avidly toward axonal tracts and nerve roots and differentiate into nonmyelinating ensheathing cells. Notably, C17.2 cells induce the de novo formation of host axon tracts aiming at graft innervation. Differentiation and inductive properties of C17.2 cells are independent of the presence of lesions in the spinal cord. The tropic/trophic interactions of C17.2 NSCs with host axons, the avid C17.2 cell–host axon contacts, and the ensheathing properties of these cells are related to their complex molecular profile, which includes the expression of trophic cytokines and neurotrophins such as glial cell line‐derived neurotrophic factor and brain‐derived neurotrophic factor, glial growth factor receptors such as ErbB‐2; and PASK, the mammalian homologue of the fray gene that is involved in axon ensheathment. These results show that NSCs might not only play a critical supportive role in repairing axonal injury in the adult spinal cord but also can be used as probes for exploring the molecular underpinnings of the regenerative potential of the mature nervous system after injury. J. Comp. Neurol. 480:101–114, 2004. © 2004 Wiley‐Liss, Inc.