Adenoviral (AdV) vectors encoding neurotrophin-3 (AdV-NT-3) or the bacterial marker enzyme beta-galactosidase (LacZ gene) were used to transduce olfactory ensheathing glia (OEG) cultures. AdV vector-transduced OEG expressed high levels of recombinant neurotrophin as shown by in situ hybridization and enzyme-linked immunosorbent assay techniques. The biological activity of vector-derived NT-3 was determined in a dorsal root ganglia neurite outgrowth assay. Engineered cell suspensions were then injected into adult Fischer 344 rat spinal cord immediately after unilateral cervical (C4) corticospinal tract (CST) transection. Transplanted animals received a total of 200,000 cells; either non-transduced OEG or OEG transduced with AdV vectors encoding NT-3 or LacZ, respectively. At 3 months after injury, lesion volumes were significantly smaller in all OEG-transplanted rats when compared with control (medium-injected) rats. Anterograde tracing of the lesioned CST projection, originating from the contralateral sensorimotor cortex, showed a significantly greater number of distal CST axons only in OEG-NT-3-transplanted rats. Behavioural analysis was performed on all rats using open field locomotion scoring, and a forelimb reaching task with Eshkol-Wachman movement notation. Analysis of behavioural tests revealed no significant differences in recovery between experimental groups, although movement analysis indicated that possible compensatory mechanisms were occurring after OEG implantation. The results demonstrate that OEG transplantation per se can promote tissue sparing after injury, but, after appropriate genetic modification, these olfactory-derived cells become far more effective in promoting long-distance maintenance/regeneration of lesioned adult CST axons.