Schwann cells are essential for axonal regrowth following injury, and Schwann cell transplantation has been proposed to encourage peripheral nerve regeneration. However there is the need to develop a methodology to enable investigation and characterisation of Schwann cells following transplantation, Initially, an identifiable and pure population of cultured Schwann cells was obtained, and transduction of lacZ genetic label was carried out. Transduced Schwann cells properties and lacZ expression were preserved for 6 month of continuous culture, demonstrating the stability of the genetically modified cells. Suspension matrix and a conduit are required for Schwann cell transplantation, and the suitability of alginate hydrogel and PHB filaments was confirmed by in vitro tests to support Schwann cell proliferation and neurite sprouting in neuron-glial co-cultures. Constructs of PHB conduits containing Schwann cells in alginate were tested in vivo, and an optimal number of cells required to enhance axonal regeneration was determined. Staining of transduced cells with X-gal histochemistry confirmed the viability of transplanted Schwann cells within the conduit, as they could be identified for up to 6 weeks post-operatively clearly associated with regenerating axons. Quantitative immunohistochemistry was used to characterise Schwann cells and axonal regrowth into the composite conduit, and it showed that transplantation of Schwann cells improved the rate and quantity of axonal regeneration. In conclusion, genetically modified Schwann cells retain their ability to enhance nerve regeneration and bioengineered nerve conduits might provide the ideal environment for optimal regeneration following peripheral nerve injury.