Neural stem cells (NSCs) in the adult mammalian central nervous system (CNS) hold the key to neural regeneration through proper activation, differentiation, and maturation, to establish nascent neural networks, which can be integrated into damaged neural circuits to repair function. However, the CNS injury microenvironment is often inhibitory and inflammatory, limiting the ability of activated NSCs to differentiate into neurons and form nascent circuits. Here we report that neurotrophin-3 (NT3)-coupled chitosan biomaterial, when inserted into a 5-mm gap of completely transected and excised rat thoracic spinal cord, elicited robust activation of endogenous NSCs in the injured spinal cord. Through slow release of NT3, the biomaterial attracted NSCs to migrate into the lesion area, differentiate into neurons, and form functional neural networks, which interconnected severed ascending and descending axons, resulting in sensory and motor behavioral recovery. Our study suggests that enhancing endogenous neurogenesis could be a novel strategy for treatment of spinal cord injury.