Neural stem cells show a remarkable aptitude for integration and appropriate differentiation at sites of cellular injury in central nervous system (CNS) disease models. In contrast, reports of neural stem cell applications in peripheral nerve injury models are sparse. In this study we sought to determine if the C17.2 cell line would respond to cues in the microenvironment of the injured peripheral nerve and enhance neuronal regeneration in rodent sciatic nerve injury models. We transplanted C17.2 into several sciatic nerve injury models in 45 nude rats, including nerve transection, nerve crush, and nerve gap models. Twelve of the animals in this study developed large tumors at the site of neural stem cell transplants. Histologically, the tumors resembled neuroblastomas. The tumors were confirmed to be of transplanted cell origin by positive β-galactosidase staining. Tumors occurred only in models where the nerve remained intact or where continuity of the nerve was restored. We concluded that C17.2 transplantation into peripheral nerve injury models resulted in a high rate of tumor formation. This study demonstrates that the success of neural precursor transplants in the CNS cannot necessarily be extrapolated to the peripheral nervous system.