In vitro expanded neural stem/progenitor cells can undergo region-specific differentiation after transplantation to the developing or adult brain, and display morphologies and markers characteristic of mature neurons. Here we have used patch-clamp techniques to explore whether grafted stem cells also can develop physiological properties of mature neurons and become functionally integrated within host neural circuitry. The immortalized neural progenitor cell line, RN33B, prelabeled with GFP by using a lentiviral vector, was transplanted into the cortex or hippocampus of neonatal rats. We found that the grafted GFP-positive cells differentiated into cells with morphological features of cortical or hippocampal pyramidal neurons, and that many of them had established appropriate cortico-thalamic and contralateral hippocampal connections, respectively, as revealed by retrograde tracing. Whole-cell patch-clamp recordings from grafted cells with morphological characteristics of pyramidal neurons showed that they were able to generate action potentials, and received functional excitatory and inhibitory synaptic inputs from neighboring cells. These data provide evidence that grafted neural progenitors can differentiate into morphologically mature pyramidal projection neurons, establish appropriate long-distance axonal projections, exhibit normal electrophysiological properties, and become functionally integrated into host cortical circuitry.