Peripheral nerve injuries (PNI) occur as the result of sudden trauma and can lead to life-long disability, reduced quality of life, and heavy economic and social burdens. Although the peripheral nervous system (PNS) has the intrinsic capacity to regenerate and regrow axons to a certain extent, current treatments frequently show incomplete recovery with poor functional outcomes, particularly for large PNI. Many surgical procedures are available to halt the propagation of nerve damage, and the choice of a procedure depends on the extent of the injury. In particular, recovery from large PNI gaps is difficult to achieve without any therapeutic intervention or some form of tissue/cell-based therapy. Autologous nerve grafting, considered the “gold standard” is often implemented for treatment of gap formation type PNI. Although these surgical procedures provide many benefits, there are still considerable limitations associated with such procedures as donor site morbidity, neuroma formation, fascicle mismatch, and scarring. To overcome such restrictions, researchers have explored various avenues to improve post-surgical outcomes. The most commonly studied methods include: cell transplantation, growth factor delivery to stimulate regenerating axons and implanting nerve guidance conduits containing replacement cells at the site of injury. Replacement cells which offer maximum benefits for the treatment of PNI, are Schwann cells (SCs), which are the peripheral glial cells and in part responsible for clearing out debris from the site of injury. Additionally, they release growth factors to stimulate myelination and axonal regeneration. Both primary SCs and genetically modified SCs enhance nerve regeneration in animal models; however, there is no good source for extracting SCs and the only method to obtain SCs is by sacrificing a healthy nerve. To overcome such challenges, various cell types have been investigated and reported to enhance nerve regeneration. In this review, we have focused on cell-based strategies aimed to enhance peripheral nerve regeneration, in particular the use of mesenchymal stem cells (MSCs). Mesenchymal stem cells are preferred due to benefits such as autologous transplantation, routine isolation procedures, and paracrine and immunomodulatory properties. Mesenchymal stem cells have been transplanted at the site of injury either directly in their native form (undifferentiated) or in a SC-like form (transdifferentiated) and have been shown to significantly enhance nerve regeneration. In addition to transdifferentiated MSCs, some studies have also transplanted ex-vivo genetically modified MSCs that hypersecrete growth factors to improve neuroregeneration.