Regeneration of peripheral nerve injury remains a major clinical challenge. Recently, mesenchymal stem cells (MSCs) have been considered as potential candidates for peripheral nerve regeneration; however, the underlying mechanisms remain elusive. Here, we show that human gingiva-derived MSCs (GMSCs) could be directly induced into multipotent NPCs (iNPCs) under minimally manipulated conditions without the introduction of exogenous genes. Using a crush-injury model of rat sciatic nerve, we demonstrate that GMSCs transplanted to the injury site could differentiate into neuronal cells, whereas iNPCs could differentiate into both neuronal and Schwann cells. After crush injury, iNPCs, compared with GMSCs, displayed superior therapeutic effects on axonal regeneration at both the injury site and the distal segment of the injured sciatic nerve. Mechanistically, transplantation of GMSCs, especially iNPCs, significantly attenuated injury-triggered increase in the expression of c-Jun, a transcription factor that functions as a major negative regulator of myelination and plays a central role in dedifferentiation/reprogramming of Schwann cells into a progenitor-like state. Meanwhile, our results also demonstrate that transplantation of GMSCs and iNPCs consistently increased the expression of Krox-20/EGR2, a transcription factor that governs the expression of myelin proteins and facilitates myelination. Altogether, our findings suggest that transplantation of GMSCs and iNPCs promotes peripheral nerve repair/regeneration, possibly by promoting remyelination of Schwann cells mediated via the regulation of the antagonistic myelination regulators, c-Jun and Krox-20/EGR2. © AlphaMed Press, 2016 The Authors.