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Stem cell transplantation holds great promise for the treatment of myocardial infarction injury. We recently described the embryonic stem cell-derived cardiac progenitor cells (CPCs) capable of differentiating into cardiomyocytes, vascular endothelium, and smooth muscle. In this study, we hypothesized that transplanted CPCs will preserve function of the infarcted heart by participating in both muscle replacement and neovascularization. Differentiated CPCs formed functional electromechanical junctions with cardiomyocytes in vitro and conducted action potentials over cm-scale distances. When transplanted into infarcted mouse hearts, CPCs engrafted long-term in the infarct zone and surrounding myocardium without causing teratomas or arrhythmias. The grafted cells differentiated into cross-striated cardiomyocytes forming gap junctions with the host cells, while also contributing to neovascularization. Serial echocardiography and pressure-volume catheterization demonstrated attenuated ventricular dilatation and preserved left ventricular fractional shortening, systolic and diastolic function. Our results demonstrate that CPCs can engraft, differentiate, and preserve the functional output of the infarcted heart.