Nerve regeneration and circuit reconstruction remain a challenge following spinal cord injury (SCI). Corticospinal pyramidal neurons possess strong axon projection ability. In this study, human induced pluripotent stem cells (iPSCs) were differentiated into pyramidal neuronal precursors (PNPs) by addition of small molecule dorsomorphin into the culture. iPSC-derived PNPs were transplanted acutely into a rat contusion SCI model on the same day of injury. Following engraftment, the SCI rats showed significantly improved motor functions compared with vehicle control group as revealed by behavioral tests. Eight weeks following engraftment, the PNPs matured into corticospinal pyramidal neurons and extended axons into distant host spinal cord tissues, mostly in a caudal direction. Host neurons rostral to the lesion site also grew axons into the graft. Possible synaptic connections as a bridging relay may have been formed between host and graft-derived neurons, as indicated by pre- and post-synaptic marker staining and the regulation of chemogenetic regulatory systems. PNP graft showed an anti-inflammatory effect at the injury site and could bias microglia/macrophages towards a M2 phenotype. In addition, PNP graft was safe and no tumor formation was detected after transplantation into immunodeficient mice and SCI rats. The potential to reconstruct a neuronal relay circuitry across the lesion site and to modulate the microenvironment in SCI makes PNPs a promising cellular candidate for treatment of SCI.© 2024. The Author(s).