Bone marrow-derived mesenchymal stem cells (MSC) have been shown to provide neuroprotection after transplantation into the injured nervous system. The present thesis investigates whether adult human and rat MSC differentiated along a Schwann cell lineage could increase their expression of neurotrophic factors and promote regeneration after transplantation into the injured peripheral nerve and spinal cord. Human and rat mesenchymal stem cells (hMSC and rMSC) expressed characteristic stem cell surface markers, mRNA transcripts for different neurotrophic factors and demonstrated multi-lineage differentiation potential. Following treatment with a cocktail of growth factors, the hMSC and rMSC expressed typical Schwann cells markers at both the transcriptional and translational level and significantly increased production of brain-derived neurotrophic factor (BDNF) and vascular endothelial growth factor (VEGF). Age and time in culture are of relevance for clinical settings and growth-promoting effects of hMSC from young donors (16-18 years) and old donors (67-75 years) were compared. Undifferentiated hMSC from both young and old donors increased total neurite length of cultured dorsal root ganglion (DRG) neurons. Differentiation of hMSC from the young donors, but not the eldery donors, further enhanced the neurite outgrowth. Undifferentiated hMSC were cultured for eleven weeks in order to examine the effect of in vitro expansion time on neurite outgrowth. hMSC from the young donors maintained their proliferation rate and their ability to enhance neurite outgrowth from DRG neurons. Using a sciatic nerve injury model, a 10mm gap was bridged with either an empty tubular fibrin glue conduit, or conduits containing hMSC, with and without cyclosporine treatment. Cells were labeled with PKH26 prior to transplantation. At 3 weeks after injury the conduits with cells and immunosuppression increased regeneration compared with an empty conduit. PKH26 labeled human cells survived in the rat model and the inflammatory reaction could be suppressed by cyclosporine. After cervical C4 hemisection, BrdU/GFP-labeled rMSC were injected into the lateral funiculus rostral and caudal to the spinal cord lesion site. Spinal cords were analyzed 2-8 weeks after transplantation. Transplanted MSC remained at the injection sites and in the trauma zone for several weeks and were often associated with numerous neurofilament-positive axons. Transplanted rMSC induced up-regulation of vascular endothelial growth factor in spinal cord tissue rostral to the injury site, but did not affect expression of brain-derived neurotrophic factor. Although rMSC provided neuroprotection for rubrospinal neurons and significantly attenuated astroglial and microglial reaction, cell transplantation caused aberrant sprouting of calcitonin gene-related peptide immunostained sensory axons in the dorsal horn. In summary these results demonstrate that both rat and human MSC can be differentiated towards the glial cell lineage, and show functional characteristics similar to Schwann cells. hMSC from the young donors represent a more favorable source for neurotransplantation since they maintain proliferation rate and preserve their growth-promoting effects in long-term cultures. The data also suggest that differentiated MSC increase expression of neurotrophic factors and support regeneration after peripheral nerve and spinal cord injury.