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Complex partial seizures arising from mesial temporal lobe structures are a defining feature of mesial temporal lobe epilepsy (TLE). For many TLE patients, there is an initial traumatic head injury that is the precipitating cause of epilepsy. Severe TLE can be associated with neuropathological changes, including hippocampal sclerosis, neurodegeneration in the dentate gyrus, and extensive reorganization of hippocampal circuits. Learning disabilities and psychiatric conditions may also occur in patients with severe TLE for whom conventional anti-epileptic drugs are ineffective. Novel treatments are needed to limit or repair neuronal damage, particularly to hippocampus and related limbic regions in severe TLE and to suppress temporal lobe seizures. A promising therapeutic strategy may be to restore inhibition of dentate gyrus granule neurons by means of cell grafts of embryonic stem cell-derived GABAergic neuron precursors. “Proof-of-concept” studies show that human and mouse embryonic stem cell-derived neural precursors can survive, migrate, and integrate into the brains of rodents in different experimental models of TLE. In addition, studies have shown that hippocampal grafts of cell lines engineered to release GABA or other anticonvulsant molecules can suppress seizures. Furthermore, transplants of fetal GABAergic progenitors from the mouse or human brain have also been shown to suppress the development of seizures. Here, we review these relevant studies and highlight areas of future research directed toward producing embryonic stem cell-derived GABAergic interneurons for cell-based therapies for treating TLE.