Stem cell-based cell replacement therapies aiming at restoring injured or diseased brain function ultimately rely on the capability of transplanted cells to promote functional recovery. The mechanisms by which stem cell-based therapies for neurological conditions can lead to functional recovery are uncertain, but structural and functional repair appears to depend on integration of transplanted cell-derived neurons into neuronal circuitries. The nature by which stem/progenitor cell-derived neurons synaptically integrate into neuronal circuitries is largely unexplored. Here we show that transplanted GFP-labeled neuronal progenitor cells into the rat hippocampus exhibit mature neuronal morphology following 4–10 weeks. GFP-positive cells were preferentially integrated into the principal cell layers of hippocampus, particularly CA3. Patch-clamp recordings from GFP-expressing cells revealed that they generated fast action potentials, and their intrinsic membrane properties were overall similar to endogenous host neurons recorded in same areas. As judged by occurrence of spontaneous excitatory postsynaptic currents (EPSCs), transplanted GFP-positive cells were synaptically integrated into the host circuitry. Comparable to host neurons, both paired-pulse depression and facilitation of afferent fiber stimulation-evoked EPSCs were observed in GFP-positive cells. Upon high-frequency stimulation, GFP-positive cells displayed post-tetanic potentiation of EPSCs, in some cases followed by long-term potentiation (LTP) lasting for more than 30 min. Our data show for the first time that transplanted neuronal progenitor cells can become functional neurons and their afferent synapses are capable of expressing activity-dependent short and long-term plasticity. These synaptic properties may facilitate host-to-graft interactions and regulate activity of the grafted cells promoting functional recovery of the diseased brain.