Neural stem cell (NSC) therapy represents a potentially powerful approach for gene transfer in the diseased central nervous system. However, transplanted primary, embryonic stem cell- and induced pluripotent stem cell-derived NSCs generate largely undifferentiated progeny. Understanding how physiologically immature cells influence host activity is critical to evaluating the therapeutic utility of NSCs. Earlier inquiries were limited to single-cell recordings and did not address the emergent properties of neuronal ensembles. To interrogate cortical networks post-transplant, we used voltage sensitive dye imaging in mouse neocortical brain slices, which permits high temporal resolution analysis of neural activity. Although moderate NSC engraftment largely preserved host physiology, subtle defects in the activation properties of synaptic inputs were induced. High-density engraftment severely dampened cortical excitability, markedly reducing the amplitude, spatial extent, and velocity of propagating synaptic potentials in layers 2-6. These global effects may be mediated by specific disruptions in excitatory network structure in deep layers. We propose that depletion of endogenous cells in engrafted neocortex contributes to circuit alterations. Our data provide the first evidence that nonintegrating cells cause differential host impairment as a function of engrafted load. Moreover, they emphasize the necessity for efficient differentiation methods and proper controls for engraftment effects that interfere with the benefits of NSC therapy.