This study evaluated the ability of Schwann cell transplants to enhance the recovery of function in injured nerves and compared the results to those produced by sural nerve grafts. Schwann cells were isolated from sciatic nerves, prelabeled with gold fluorescent dye admixed with collagen gel, and placed in resorbable collagen tubes. Twenty-four adult rats underwent severing of the bilateral sciatic nerves, with a 10-mm gap between the nerve stumps. The rats were then divided into two groups. A collagen tube with implanted Schwann cells was implanted in one leg of the Group I rats, and the contralateral leg served as a control and was repaired with a collagen tube filled with collagen gel only. The Group II animals received conduits packed with labeled Schwann cells in one leg to bridge the 10-mm gap; the contralateral leg was repaired with an autogenous sural nerve graft. Recovery of function was assessed physiologically and morphologically. Nerve conduction velocity and nerve action potential amplitude measurements showed that the Schwann cell implants induced return of function comparable to that of the sural nerve grafts. Morphological assessments of myelination suggested a tendency toward greater numbers of myelinated axons in Schwann cell implants than in sural nerve grafts. Anatomical analyses of gold fluorescent dye showed both high viability of prelabeled Schwann cells at 120 days after transplantation and migration as far as 30 mm away from the implant site.