Numerous studies have shown the benefits of mesenchymal stem cells (MSCs) on the repair of spinal cord injury (SCI) model and on behavioral improvement, but the underlying mechanisms remain unclear. In this study, to investigate possible mechanisms by which MSCs contribute to the alleviation of neurologic deficits, we examined the potential effect of human umbilical cord blood-derived MSCs (hUCB-MSCs) on the endogenous cell proliferation and oligogenesis after SCI. SCI was injured by contusion using a weight-drop impactor and hUCB-MSCs were transplanted into the boundary zone of the injured site. Animals received a daily injection of bromodeoxyuridine (BrdU) for 7 days after treatment to identity newly synthesized cells of ependymal and periependymal cells that immunohistochemically resembled stem/progenitor cells was evident. Behavior analysis revealed that locomotor functions of hUCB-MSCs group were restored significantly and the cavity volume was smaller in the MSCs-transplanted rats compared to the control group. In MSCs-transplanted group, TUNEL-positive cells were decreased and BrdU-positive cells were significantly increased rats compared with control group. In addition, more of BrdU-positive cells expressed neural stem/progenitor cell nestin and oligo-lineage cell such as NG2, CNPase, MBP and glial fibrillary acidic protein typical of astrocytes in the MSC-transplanted rats. Thus, endogenous cell proliferation and oligogenesis contribute to MSC-promoted functional recovery following SCI.