Spinal cord transplants of embryonic cortical GABAergic progenitor cells derived from the medial ganglionic eminence (MGE) can reverse mechanical hypersensitivity in the mouse models of peripheral nerve injury- and paclitaxel-induced neuropathic pain. Here, we used electrophysiology, immunohistochemistry, and electron microscopy to examine the extent to which MGE cells integrate into host circuitry and recapitulate endogenous inhibitory circuits. Whether the transplants were performed before or after nerve injury, the MGE cells developed into mature neurons and exhibited firing patterns characteristic of subpopulations of cortical and spinal cord inhibitory interneurons. Conversely, the transplanted cells preserved cortical morphological and neurochemical properties. We also observed a robust anatomical and functional synaptic integration of the transplanted cells into host circuitry in both injured and uninjured animals. The MGE cells were activated by primary afferents, including TRPV1-expressing nociceptors, and formed GABAergic, bicuculline-sensitive, synapses onto host neurons. Unexpectedly, MGE cells transplanted before injury prevented the development of mechanical hypersensitivity. Together, our findings provide direct confirmation of an extensive, functional synaptic integration of MGE cells into host spinal cord circuits. This integration underlies normalization of the dorsal horn inhibitory tone after injury and may be responsible for the prophylactic effect of preinjury transplants. Significance statement: Spinal cord transplants of embryonic cortical GABAergic interneuron progenitors from the medial ganglionic eminence (MGE), can overcome the mechanical hypersensitivity produced in different neuropathic pain models in adult mice. Here, we examined the properties of transplanted MGE cells and the extent to which they integrate into spinal cord circuitry. Using electrophysiology, immunohistochemistry, and electron microscopy, we demonstrate that MGE cells, whether transplanted before or after nerve injury, develop into inhibitory neurons, are activated by nociceptive primary afferents, and form GABA-A-mediated inhibitory synapses with the host. Unexpectedly, cells transplanted into naive spinal cord prevented the development of nerve-injury-induced mechanical hypersensitivity. These results illustrate the remarkable plasticity of adult spinal cord and the potential of cell-based therapies against neuropathic pain.