The lack of tissue regeneration after traumatic spinal cord injury in animal models is largely attributed to the local inhibitory microenvironment. To overcome this inhibitory environment while promoting tissue regeneration, we investigated the combined delivery of chondroitinase ABC (chABC) with human induced pluripotent stem cell-derived neuroepithelial stem cells (NESCs). ChABC was delivered to the injured spinal cord at the site of injury by affinity release from a crosslinked methylcellulose (MC) hydrogel by injection into the intrathecal space. NESCs were distributed in a hydrogel comprised of hyaluronan and MC and injected into the spinal cord tissue both rostral and caudal to the site of injury. Cell transplantation led to reduced cavity formation, but did not improve motor function. While few surviving cells were found 2 weeks post injury, the majority of live cells were neurons, with only few astrocytes, oligodendrocytes, and progenitor cells. At 9 weeks post injury, there were more progenitor cells and a more even distribution of cell types compared to those at 2 weeks post injury, suggesting preferential survival and differentiation. Interestingly, animals that received cells and chABC had more neurons than animals that received cells alone, suggesting that chABC influenced the injury environment such that neuronal differentiation or survival was favoured.