Despite extensive gray matter loss following spinal cord injury (SCI), little attention has been given to neuronal replacement strategies and their effects on specific functional circuits in the injured spinal cord. In the present study, we assessed breathing behavior and phrenic nerve electrophysiological activity following transplantation of microdissected dorsal or ventral pieces of rat fetal spinal cord tissue (FSC(D) or FSC(V), respectively) into acute, cervical (C2) spinal hemisections. Transneuronal tracing demonstrated connectivity between donor neurons from both sources and the host phrenic circuitry. Phrenic nerve recordings revealed differential effects of dorsally vs. ventrally derived neural progenitors on ipsilateral phrenic nerve recovery and activity. These initial results suggest that local gray matter repair can influence motoneuron function in targeted circuits following spinal cord injury and that outcomes will be dependent on the properties and phenotypic fates of the donor cells employed.