Studies in rodent epilepsy models suggest that GABAergic interneuron progenitor grafts can reduce hyperexcitability and seizures in temporal lobe epilepsy (TLE). Although integration of the transplanted cells has been proposed as the underlying mechanism for these disease-modifying effects, prior studies have not explicitly examined cell types and synaptic mechanisms for long-term seizure suppression. To address this gap, we transplanted medial ganglionic eminence (MGE) cells from embryonic day 13.5 VGAT-Venus or VGAT-ChR2-EYFP transgenic embryos into the dentate gyrus (DG) of adult mice 2 weeks after induction of TLE with pilocarpine. Beginning 3–4 weeks after status epilepticus, we conducted continuous video-electroencephalographic recording until 90–100 d. TLE mice with bilateral MGE cell grafts in the DG had significantly fewer and milder electrographic seizures, compared with TLE controls. Immunohistochemical studies showed that the transplants contained multiple neuropeptide or calcium-binding protein-expressing interneuron types and these cells established dense terminal arborizations onto the somas, apical dendrites, and axon initial segments of dentate granule cells (GCs). A majority of the synaptic terminals formed by the transplanted cells were apposed to large postsynaptic clusters of gephyrin, indicative of mature inhibitory synaptic complexes. Functionality of these new inhibitory synapses was demonstrated by optogenetically activating VGAT-ChR2-EYFP-expressing transplanted neurons, which generated robust hyperpolarizations in GCs. These findings suggest that fetal GABAergic interneuron grafts may suppress pharmacoresistant seizures by enhancing synaptic inhibition in DG neural circuits.