Aims: Hypoxic-ischaemic encephalopathy (HIE) is one of the most serious complications in neonates and infants. Mesenchymal stromal cell (MSC)-based therapy is emerging as a promising treatment avenue for HIE. However, despite its enormous potential, the clinical application of MSCs is limited by cell heterogeneity, low isolation efficiency and unpredictable effectiveness. In this study, we examined the therapeutic effects and underlying mechanisms of human pluripotent stem cell-derived ectomesenchymal stromal cells (hPSC-EMSCs) in a rat model of HIE.Methods: hPSC-EMSCs were induced from either human embryonic stem cells or induced pluripotent stem cells. Stem cells or the conditioned medium (CM) derived from stem cells were delivered intracranially or intranasally to neonatal rats with HIE. Human umbilical cord-derived MSCs (hUC-MSCs) were used as the therapeutic comparison control and phosphate-buffered saline (PBS) was used as a negative control. Lesion size, apoptosis, neurogenesis, astrogliosis and microgliosis were evaluated. The rotarod test and Morris water maze were used to determine brain functional recovery. The PC-12 cell line, rat primary cortical neurons and neural progenitor cells were used to evaluate neurite outgrowth and the neuroprotective and neurogenesis effects of hPSC-EMSCs/hUC-MSCs. RNA-seq and enzyme-linked immunosorbent assays were used to determine the secretory factors that were differentially expressed between hPSC-EMSCs and hUC-MSCs. The activation and suppression of extracellular signal-regulated kinase (ERK) and cAMP response element-binding protein (CREB) were characterised using western blotting and immunofluorescent staining.Results: hPSC-EMSCs showed a higher neuroprotective potential than hUC-MSCs, as demonstrated by a more significant reduction in lesion size and apoptosis in the rat brain following hypoxia-ischaemia (HI). Compared with PBS treatment, hPSC-EMSCs promoted endogenous neurogenesis and alleviated astrogliosis and microgliosis. hPSC-EMSCs were more effective than hUC-MSCs. hPSC-EMSCs achieved a greater recovery of brain function than hUC-MSCs and PBS in rats with HIE. CM derived from hPSC-EMSCs had neuroprotective and neurorestorative effects in vitro through anti-apoptotic and neurite outgrowth- and neurogenesis-promoting effects. Direct comparisons between hPSC-EMSCs and hUC-MSCs revealed the significant enrichment of a group of secretory factors in hPSC-EMSCs, including nerve growth factor (NGF), platelet-derived growth factor-AA and transforming growth factor-β2, which are involved in neurogenesis, synaptic transmission and neurotransmitter transport, respectively. Mechanistically, the CM derived from hPSC-EMSCs was found to potentiate NGF-induced neurite outgrowth and the neuronal differentiation of NPCs via the ERK/CREB pathway. Suppression of ERK or CREB abolished CM-potentiated neuritogenesis and neuronal differentiation. Finally, intranasal delivery of the CM derived from hPSC-EMSCs significantly reduced brain lesion size, promoted endogenous neurogenesis, mitigated inflammatory responses and improved functional recovery in rats with HIE.Conclusion: hPSC-EMSCs promote functional recovery after HI through multifaceted neuromodulatory activities via paracrine/trophic mechanisms. We propose the use of hPSC-EMSCs for the treatment of HIE, as they offer an excellent unlimited cellular source of MSCs.