Loss of synaptic activity or innervation induces sprouting of intact motor nerve terminals that adds or restores nerve-muscle connectivity. Ciliary neurotrophic factor (CNTF) and terminal Schwann cells (tSCs) have been implicated as molecular and cellular mediators of the compensatory process. We wondered if the previously reported lack of terminal sprouting in CNTF null mice was due to abnormal reactivity of tSCs. To this end, we examined nerve terminal and tSC responses in CNTF null mice using experimental systems that elicited extensive sprouting in wildtype mice. Contrary to the previous report, we found that motor nerve terminals in the null mice sprout extensively in response to major sprouting-stimuli such as exogenously applied CNTF per se, botulinum toxin-elicited paralysis, and partial denervation by L4 spinal root transection. In addition, the number, length and growth patterns of terminal sprouts, and the extent of reinnervation by terminal or nodal sprouts, were similar in wildtype and null mice. tSCs in the null mice were also reactive to the sprouting-stimuli, elaborating cellular processes that accompanied terminal sprouts or guided reinnervation of denervated muscle fibers. Lastly, CNTF was absent in quiescent tSCs in intact, wildtype muscles and little if any was detected in reactive tSCs in denervated muscles. Thus, CNTF is not required for induction of nerve terminal sprouting, for reactivation of tSCs, and for compensatory reinnervation after nerve injury. We interpret these results to support the notion that compensatory sprouting in adult muscles is induced primarily by contact-mediated mechanisms, rather than by diffusible factors.