Hypoxic-ischaemic encephalopathy (HIE) is one of the most serious complications in neonates and infants. Mesenchymal stromal cell (MSC)-based therapy is emerging as a promising treatment avenue for HIE. However, despite its enormous potential, the clinical application of MSCs is limited by cell heterogeneity, low isolation efficiency and unpredictable effectiveness. In this study, we investigated the therapeutic effects of human pluripotent stem cell-derived ectomesenchymal stromal cells (hPSC-EMSCs) and human umbilical cord-derived mesenchymal stem cells (hUC-MSCs) in a rat model of HIE. Lesion size, apoptosis, neurogenesis, astrogliosis and microgliosis were evaluated. The rotarod test and Morris water maze were used to determine brain functional recovery. Our results demonstrated that, compared with PBS treatment, hPSC-EMSCs and hUC-MSC promoted endogenous neurogenesis and alleviated astrogliosis and microgliosis. Further analysis revealed that, compared with hUC-MSCs, hPSC-EMSCs exhibited superior neuroprotective effects, promoted endogenous neurogenesis and reduced inflammatory responses more effectively, and significantly enhanced the recovery of motor and cognitive functions in HIE rat. In this study, for the first time, we demonstrate that hPSC-EMSCs achieve a greater recovery of brain function than hUC-MSCs and PBS in rats with HIE.