A basic experiment of peripheral nerve regeneration using neuronal progenitor cells embedded in collagen gel was performed in a rat sciatic nerve defect. First, when neuronal progenitor cells derived from the fetal rat hippocampus were cultured in atelocollagen-containing medium, neurospheres positive for anti-nestin antibody were confirmed after 8 days. These cells differentiated into astrocytes positive for anti-glial fibrillary acidic protein (GFAP) antibody, oligodendrocytes positive for anti-galactocerebroside (GalC) antibody and neurons positive for anti-neurofilament 200 (NF200) antibody, and they were capable of extending axons. They also differentiated into Schwann-like supportive cells positive for anti-s100 and anti-p75 antibody. Next, a 15-mm defect was prepared in the sciatic nerve of mature rats, and the nerve was bridged with a silicone tube filled with neuronal progenitor cells (1 x 10(5)) embedded in collagen gel. The transplanted neuronal progenitor cells were labeled in advance with 5-bromo-2-deoxyuridine (BrdU). When the regenerated tissue was examined 6 weeks and 10 weeks after grafting, the number and diameter of myelinated fibers were significantly increased compared with a control tube without neuronal progenitor cells. Action potentials were detected in the regenerated nerve. Also, cells positive for both anti-BrdU antibody and anti-S100 or anti-p75 antibody were observed in the regenerated tissue, and part of the grafted neural stem cells were considered to have differentiated into Schwann cell-like supportive cells. From these results neuronal progenitor cells derived from the fetal rat hippocampus are considered to retain their proliferative and differentiating abilities in collagen gel, and when transplanted to a site of peripheral nerve defect, part of them differentiate into supportive cells and they contributed to promotion of axonal regeneration.