The transplantation of well defined populations of precursor cells offers a means of repairing damaged tissue and of delivering therapeutic compounds to sites of injury or degeneration. For example, a functional immune system can be reconstituted by transplantation of purified haematopoietic stem cells, and transplanted skeletal myoblasts and keratinocytes can participate in the formation of normal tissue in host animals. Cell transplantation in the central nervous system (CNS) has been proposed as a means of correcting neuronal dysfunction in diseases associated with neuronal loss; it might also rectify glial cell dysfunction, with transplanted oligodendrocyte precursor cells eventually allowing repair of demyelinating damage in the CNS. Here we use co-operating growth factors to expand purified populations of oligodendrocyte type-2 astrocyte (O-2A) progenitor cells for several weeks in vitro. When injected into demyelinating lesions in spinal cords of adult rats, created in such a way as to preclude host-mediated remyelination, these expanded populations are capable of producing extensive remyelination. In addition, transplantation of O-2A progenitor cells genetically modified to express the bacterial beta-galactosidase gene gives rise to beta-galactosidase-positive oligodendrocytes which remyelinate demyelinated axons within the lesion. These results offer a viable strategy for the manipulation of neural precursor cells which is compatible with attempts to repair damaged CNS tissue by precursor transplantation.