Objective To observe the effects of subretinal transplantation of rat mesenchymal stem cells (rMSCs) on Sodium Iodate (SI)induced retinal degeneration. Methods One hundred and twenty BrownNorway (BN) rats were divided into three groups including SI injection group,rMSCs transplantation group and normal control group, each with 40 rats. The retinal degeneration was induced by caudal vein injection of SI. The retinal pigment epithelium（RPE）and neural retinal were evaluated by ocular fundus photograph, fluorescein fundus angiography (FFA)，electroretinogram (ERG) and histological approach, and TUNEL（terminal deoxynucleotidyl transferasemediated dUTP nick end labeling ）. CMDiIprelabeled primary rMSCs were transplanted into the subretinal space of SIinduced rats. The survival, integration, and differentiation of rMSCs were observed between 14 day to 60 day after the transplantation.Results The rat retinal function was gradually reduced after14 days of SI injection, with a timedependent manner. After the RPE cells were damaged，the outer segments of photoreceptors became disrupted and shortened until karyopyknosis. The nuclear morphology and positive TUNEL labeling indicated that the death of photoreceptor cells was apoptosis. After rMSCs transplantation, CMDiI labeled donor cells were observed to be scattered in the subretinal space and expressed RPE cell markers. Average amplitude of b wave and Ops (oscillation potential) in ERG improved 27.80%,59.38% respectively after rMSCs transplantation.Conclusions Transplanted rMSCs can survive in subretinal space and differentiate into RPE.