We recently described a method for reconstituting peripheral nerve (PN) sheaths using adult Schwann cells (SCs). Reconstructed PN tissue grafted onto the cut optic nerve supports the regeneration of injured adult rat retinal ganglion cell (RGC) axons. To determine whether genetic manipulation of such grafts can further enhance regeneration, adult SCs were transduced with lentiviral vectors encoding either ciliary neurotrophic factor (LV-CNTF) or green fluorescent protein (LV-GFP). SCs expressed transgenes for at least 4 weeks after transplantation. There were high levels of CNTF mRNA and CNTF protein in PN grafts containing LV-CNTF-transduced SCs. Mean RGC survival was significantly increased with these grafts (11,863/retina) compared with LV-GFP controls (7064/retina). LV-CNTF-transduced SCs enhanced axonal regeneration to an even greater extent (3097 vs 393 RGCs/retina in LV-GFP controls). Many regenerated axons were myelinated. The use of genetically modified, reconstituted PN grafts to bridge tissue defects may provide new therapeutic strategies for the treatment of both CNS and PNS injuries.