Hypoxic preconditioning of stem cells and neural progenitor cells has been tested for promoting cell survival after transplantation. The present investigation examined the hypothesis that hypoxic preconditioning of bone marrow mesenchymal stem cells (BMSCs) could not only enhance their survival but also reinforce regenerative properties of these cells. BMSCs from eGFP engineered rats or pre-labeled with BrdU were pre-treated with normoxia (20% O2, N-BMSCs) or sublethal hypoxia (0.5% O2. H-BMSCs). The hypoxia exposure up-regulated HIF-1α and trophic/growth factors in BMSCs, including brain-derived neurotrophic factor (BDNF), glial cell-derived neurotrophic factor (GDNF), vascular endothelial growth factor (VEGF) and its receptor FIK-1, erythropoietin (EPO) and its receptor EPOR, stromal derived factor-1 (SDF-1) and its CXC chemokine receptor 4 (CXCR4). Meanwhile, many pro-inflammatory cytokines/chemokines were downregulated in H-BMSCs. N-BMSCs or H-BMSCs were intravenously injected into adult rats 24 hrs after 90-min middle cerebral artery occlusion. Comparing to N-BMSCs, transplantation of H-BMSCs showed greater effect of suppressing microglia activity in the brain. Significantly more NeuN-positive and Glut1-positive cells were seen in the ischemic core and peri-infarct regions of the animals received H-BMSC transplantation than that received N-BMSCs. Some NeuN-positive and Glut-1-positive cells showed eGFP or BrdU immunoflourescent reactivity, suggesting differentiation from exogenous BMSCs into neuronal and vascular endothelial cells. In Rota-rod test performed 15 days after stroke, animals received H-BMSCs showed better locomotion recovery compared with stroke control and N-BMSC groups. We suggest that hypoxic preconditioning of transplanted cells is an effective means of promoting their regenerative capability and therapeutic potential for the treatment of ischemic stroke.