Transplantation of olfactory ensheathing cells (OECs) into injured spinal cord results in improved functional outcome. Mechanisms suggested to account for this functional improvement include axonal regeneration, remyelination and neuroprotection. OECs transplanted into transected peripheral nerve have been shown to modify peripheral axonal regeneration and functional outcome. However, little is known of the detailed integration of OECs at the transplantation site in peripheral nerve. To address this issue, cell populations enriched in OECs were isolated from the olfactory bulbs of adult green fluorescent protein (GFP)-expressing transgenic rats and transplanted into a sciatic nerve crush lesion which transects all axons. Five weeks to 6 months after transplantation, the nerves were studied histologically. GFP-expressing OECs survived in the lesion and distributed longitudinally across the lesion zone. The internodal regions of individual teased fibers distal to the transection site were characterized by GFP expression in the cytoplasmic and nuclear compartments of cells surrounding the axons. Immunoelectron microscopy for GFP indicated that the transplanted OECs formed peripheral type myelin. Immunostaining for sodium channel and Caspr revealed a high density of Na(v)1.6 at the newly formed nodes of Ranvier which were flanked by paranodal Caspr staining. These results indicate that transplanted OECs extensively integrate into transected peripheral nerve and form myelin on regenerated peripheral nerve fibers, and that nodes of Ranvier of these axons display proper sodium channel organization.