Transplantation of neural progenitor cells (NPC) is a promising therapeutic strategy for replacing neurons lost after spinal cord injury, but significant challenges remain regarding neuronal integration and functional connectivity. Here we tested the ability of graft-derived neurons to reestablish connectivity by forming neuronal relays between injured dorsal column (DC) sensory axons and the denervated dorsal column nuclei (DCN). A mixed population of neuronal and glial restricted precursors (NRP/GRP) derived from the embryonic spinal cord of alkaline phosphatase (AP) transgenic rats were grafted acutely into a DC lesion at C1. One week later, BDNF-expressing lentivirus was injected into the DCN to guide graft axons to the intended target. Six weeks later, we observed anterogradely traced sensory axons regenerating into the graft and robust growth of graft-derived AP-positive axons along the neurotrophin gradient into the DCN. Immunoelectron microscopy revealed excitatory synaptic connections between regenerating host axons and graft-derived neurons at C1 as well as between graft axons and DCN neurons in the brainstem. Functional analysis by stimulus-evoked c-Fos expression and electrophysiological recording showed that host axons formed active synapses with graft neurons at the injury site with the signal propagating by graft axons to the DCN. We observed reproducible electrophysiological activity at the DCN with a temporal delay predicted by our relay model. These findings provide the first evidence for the ability of NPC to form a neuronal relay by extending active axons across the injured spinal cord to the intended target establishing a critical step for neural repair with stem cells.