Olfactory ensheathing cells (OECs), which have properties of both astrocytes and Schwann cells, can remyelinate axons with a Schwann cell-like pattern of myelin. In this study the pattern and extent of remyelination and the electrophysiological properties of dorsal column axons were characterized after transplantation of OECs into a demyelinated rat spinal cord lesion. Dorsal columns of adult rat spinal cords were demyelinated by x-ray irradiation and focal injections of ethidium bromide. Cell suspensions of acutely dissociated OECs from neonatal rats were injected into the lesion 6 d after x-ray irradiation. At 21–25 d after transplantation of OECs, the spinal cords were maintained in an in vitro recording chamber to study the conduction properties of the axons. The remyelinated axons displayed improved conduction velocity and frequency–response properties, and action potentials were conducted a greater distance into the lesion, suggesting that conduction block was overcome. Quantitative histological analysis revealed remyelinated axons near and remote from the cell injection site, indicating extensive migration of OECs within the lesion. These data support the conclusion that transplantation of neonatal OECs results in quantitatively extensive and functional remyelination of demyelinated dorsal column axons.