You should set DefaultCellStyle.WrapMode property of column to DataGridViewTriState.True. After that text in cells will be displayed correctly.
Example (DataGridView with one column):
dataGridView1.Columns[0].DefaultCellStyle.WrapMode = DataGridViewTriState.True;
dataGridView1.Rows.Add("test" + Environment.NewLine + "test");
(Environment.NewLine = \r\n in Windows)