Although human amnion derived mesenchymal stem cells (AMSC) are a promising source of stem cells, their therapeutic potential for traumatic brain injury (TBI) has not been widely investigated. In this study, we evaluated the therapeutic potential of AMSC using a rat TBI model. AMSC were isolated from human amniotic membrane and characterized by flow cytometry. After induction, AMSC differentiated in vitro into neural stem-like cells (AM-NSC) that expressed higher levels of the neural stem cell markers, nestin, sox2 and musashi, in comparison to undifferentiated AMSC. Interestingly, the neurotrophic factors, brain-derived neurotrophic factor (BDNF), nerve growth factor (NGF), neurotrophin 3 (NT-3), glial cell derived neurotrophic factor (GDNF) and ciliary neurotrophic factor (CNTF) were markedly upregulated after neural stem cell induction. Following transplantation in a rat TBI model, significant improvements in neurological function, brain tissue morphology, and higher levels of BDNF, NGF, NT-3, GDNF and CNTF, were observed in the AM-NSC group compared with the AMSC and Matrigel groups. However, few grafted cells survived with minimal differentiation into neural-like cells. Together, our results suggest that transplantation of AM-NSC promotes functional rehabilitation of rats with TBI, with enhanced expression of neurotrophic factors a likely mechanistic pathway.