Introduction of autologous stem cells into the site of a nerve injury presents a promising therapy to promote axonal regeneration and remyelination following peripheral nerve damage. Given their documented ability to differentiate into Schwann cells (SCs) in vitro, we hypothesized that skin-derived precursor cells (SKPs) could represent a clinically-relevant source of transplantable cells that would enhance nerve regeneration following peripheral nerve injury. In this study, we examined the potential for SKP-derived Schwann cells (SKP-SCs) or nerve-derived SCs to improve nerve regeneration across a 12 mm gap created in the sciatic nerve of Lewis rats bridged by a freeze-thawed nerve graft. Immunohistology after 4 weeks showed survival of both cell types and early regeneration in SKP seeded grafts was comparable to those seeded with SCs. Histomorphometrical and electrophysiological measurements of cell-treated nerve segments after 8 weeks survival all showed significant improvement as compared to diluent controls. A possible mechanistic explanation for the observed results of improved regenerative outcomes lies in SKP-SCs' ability to secrete bioactive neurotrophins. We therefore conclude that SKPs represent an easily accessible, autologous source of stem cells for transplantation therapies which act as functional Schwann cells and show great promise in improving regeneration following nerve injury.