Cell therapy has emerged as a potential treatment for many neurodegenerative diseases including stroke and neonatal ischemic brain injury. Delayed intranasal administration of mesenchymal stem cells (MSCs) after experimental hypoxia-ischemia and after a transient middle cerebral artery occlusion (tMCAO) in neonatal rats has shown improvement in long-term functional outcomes, but the effects of MSCs on white matter injury (WMI) are insufficiently understood. In this study we used longitudinal T2-weighted (T2W) and diffusion tensor magnetic resonance imaging (MRI) to characterize chronic injury after tMCAO induced in postnatal day 10 (P10) rats and examined the effects of delayed MSC administration on WMI, axonal coverage, and long-term somatosensory function. We show unilateral injury- and region-dependent changes in diffusion fraction anisotropy 1 and 2 weeks after tMCAO that correspond to accumulation of degraded myelin basic protein, astrocytosis, and decreased axonal coverage. With the use of stringent T2W-based injury criteria at 72 hr after tMCAO to randomize neonatal rats to receive intranasal MSCs or vehicle, we show that a single MSC administration attenuates WMI and enhances somatosensory function 28 days after stroke. A positive correlation was found between MSC-enhanced white matter integrity and functional performance in injured neonatal rats. Collectively, these data indicate that the damage induced by tMCAO progresses over time and is halted by administration of MSCs. © 2016 Wiley Periodicals, Inc.