Bone marrow stromal cells (MSCs) constitute a heterogeneous cell layer in the bone marrow, supporting the growth and differentiation of hematopoietic stem cells. Recently, it has been reported that MSCs harbor pluripotent stem cells capable of neural differentiation and that simple treatment of MSCs with chemical inducing agents leads to their rapid transdifferentiation into neural cells. We examined whether native or neurally induced MSCs would reconstitute an axonal growth-promoting milieu after cervical spinal cord injury (SCI), and whether such cells could act as vehicles of growth factor gene delivery to further augment axonal growth. One month after grafting to cystic sites of SCI, native MSCs supported modest growth of host sensory and motor axons. Cells “neurally” induced in vitro did not sustain a neural phenotype in vivo and supported host axonal growth to a degree equal to native MSCs. Transduction of MSCs to overexpress brain-derived neurotrophic factor (BDNF) resulted in a significant increase in the extent and diversity of host axonal growth, enhancing the growth of host serotonergic, coerulospinal, and dorsal column sensory axons. Measurement of neurotrophin production from implanted cells in the lesion site revealed that the grafts naturally contain nerve growth factor (NGF) and neurotrophin-3 (NT-3), and that transduction with BDNF markedly raises levels of BDNF production. Despite the extensive nature of host axonal penetration into the lesion site, functional recovery was not observed on a tape removal or rope-walking task. Thus, MSCs can support host axonal growth after spinal cord injury and are suitable cell types for ex vivo gene delivery. Combination therapy with other experimental approaches will likely be required to achieve axonal growth beyond the lesion site and functional recovery.