Bone marrow contains a population of stem-like cells that can differentiate into neurons or glia. Stromal cells from green fluorescent protein (GFP)-expressing mice were isolated by initial separation on a density gradient and then cultured as adherent cells on plastic that proliferated in culture to confluency with a typical flattened elongative morphology. The large majority of the isolated stromal cells were GFP expressing and immunopositive for collagen type I, fibronectin, and CD44. Transplantation of these cells by direct microinjection into the demyelinated spinal cord of the immunosuppressed rat resulted in remyelination. The remyelinated axons showed characteristics of both central and peripheral myelination as observed by electron microscopy; conduction velocity of the axons was improved. GFP-positive cells and myelin profiles were observed in the remyelinated spinal cord region, indicating that the donor-isolated stromal cells were responsible for the formation of the new myelin. The GFP-positive cells were colocalized with myelin basic protein-positive and P0-positive cellular elements. These findings indicate that cells contained within the stromal cell fraction of the mononuclear cell layer of bone marrow can form functional myelin during transplantation into demyelinated spinal cord.