Serotonin (5-HT), an important modulator of both sensory and motor functions in the mammalian spinal cord, originates mainly in the raphe nuclei of the brainstem. However, following complete transection of the spinal cord, small amounts of 5-HT remain detectable below the lesion. It has been suggested, but not proven, that this residual 5-HT is produced by intraspinal 5-HT neurons. Here, we show by immunohistochemical techniques that cells containing the enzyme aromatic l-amino acid decarboxylase (AADC) occur not only near the central canal, as reported by others, but also in the intermediate zone and dorsal horn of the spinal gray matter. We show that, following complete transection of the rat spinal cord at S2 level, AADC cells distal to the lesion acquire the ability to produce 5-HT from its immediate precursor, 5-hydroxytryptophan. Our results indicate that this phenotypic change in spinal AADC cells is initiated by the loss of descending 5-HT projections due to spinal cord injury (SCI). By in vivo and in vitro electrophysiology, we show that 5-HT produced by AADC cells increases the excitability of spinal motoneurons. The phenotypic change in AADC cells appears to result from a loss of inhibition by descending 5-HT neurons and to be mediated by 5-HT1B receptors expressed by AADC cells. These findings indicate that AADC cells are a potential source of 5-HT at spinal levels below an SCI. The production of 5-HT by AADC cells, together with an upregulation of 5-HT2 receptors, offers a partial explanation of hyperreflexia below a chronic SCI.