Cell transplantation using bone marrow stromal cells (BMSCs) to alleviate neurological deficits has recently become the focus of research in regenerative medicine. Evidence suggests that secretion of various growth-promoting substances likely plays an important role in functional recovery against neurological diseases. In an attempt to identify a possible mechanism underlying the regenerative potential of BMSCs, this study investigated the production and possible contribution of neurotrophic factors by transected sciatic nerve defect in a rat model with a 15 mm gap. Cultured BMSCs became morphologically homogeneous with fibroblast-like shape after ex vivo expansion. We provided several pieces of evidence for the beneficial effects of implanted fibroblast-like BMSCs on sciatic nerve regeneration. When compared to silicone tube control animals, this treatment led to (i) improved walking behavior as measured by footprint analysis, (ii) reduced loss of gastrocnemius muscle weight and EMG magnitude, and (iii) greater number of regenerating axons within the tube. Cultured fibroblast-like BMSCs constitutively expressed trophic factors and supporting substances, including nerve growth factor (NGF), brain-derived neurotrophic factor (BDNF), glial cell line-derived neurotrophic factor (GDNF), ciliary neurotrophic factor (CNTF), collagen, fibronectin, and laminin. The progression of the regenerative process after BMSC implantation was accompanied by elevated expression of neurotrophic factors at both early and later phases. These results taken together, in addition to documented Schwann cell-like differentiation, provide evidence indicating the strong association of neurotrophic factor production and the regenerative potential of implanted BMSCs.