We have previously reported that cell-seeded alginate hydrogels (AHs) with anisotropic capillaries can restore the continuity of the spinal cord and support axonal regeneration in a rat model of acute partial spinal cord transection. Whether similar effects can be found after transplantation into sites of complete chronic spinal cord transections without additional growth-promoting stimuli has not been investigated. We therefore implanted AHs into the cavity of a chronic thoracic transection following scar resection (SR) 4 weeks postinjury and examined electrophysiological and functional recovery as well as regeneration of descending and ascending projections within and beyond the AH scaffold up to 3 months after engraftment. Our results indicate that both electrophysiological conductivity and locomotor function are significantly improved after AH engraftment. SR transiently impairs locomotor function immediately after surgery but does not affect long-term outcomes. Histological analysis shows numerous host cells migrating into the scaffold channels and a reduction of fibroglial scaring around the lesion by AH grafts. In contrast to corticospinal axons, raphaespinal and propriospinal descending axons and ascending sensory axons regenerate throughout the scaffolds and extend into the distal host parenchyma. These results further support the pro-regenerative properties of AHs and their therapeutic potential for chronic SCI in combination with other strategies to improve functional outcomes after spinal cord injury.