Background: Stroke is a major cause of disability worldwide, and effective rehabilitation is crucial to regain skills for independent living. Recently, novel therapeutic approaches manipulating the excitatory-inhibitory balance of the motor cortex have been introduced to boost recovery after stroke. However, stroke-induced neurophysiological changes of the motor cortex may vary despite of similar clinical symptoms. Therefore, better understanding of excitability changes after stroke is essential when developing and targeting novel therapeutic approaches. Objective and Methods: We identified recovery-related alterations in motor cortex excitability after stroke using magnetoencephalography. Dynamics (suppression and rebound) of the ∼20-Hz motor cortex rhythm were monitored during passive movement of the index finger in 23 stroke patients with upper limb paresis at acute phase, 1 month, and 1 year after stroke. Results: After stroke, the strength of the ∼20-Hz rebound to stimulation of both impaired and healthy hand was decreased with respect to the controls in the affected (AH) and unaffected (UH) hemispheres, and increased during recovery. Importantly, the rebound strength was lower than that of the controls in the AH and UH also to healthy-hand stimulation despite of intact afferent input. In the AH, the rebound strength to impaired-hand stimulation correlated with hand motor recovery. Conclusions: Motor cortex excitability is increased bilaterally after stroke and decreases concomitantly with recovery. Motor cortex excitability changes are related to both alterations in local excitatory-inhibitory circuits and changes in afferent input. Fluent sensorimotor integration, which is closely coupled with excitability changes, seems to be a key factor for motor recovery.