Neuroblastoma (NB) tumors with abundant schwannian stroma have a differentiated phenotype, low vascularity, and are associated with a favorable prognosis. These observations suggest that cross-talk between Schwann cells and neuroblasts may influence tumor biology. To test this hypothesis, we developed a novel NB xenograft model with infiltrating mouse Schwann cells. Human SMS-KCNR NB cells were injected intrafascicularly (sciatic nerve-engrafted NB, n = 19) or outside the sciatic nerve (control, n = 12). Xenografts were harvested 4 to 12 weeks after tumor cell inoculation for histological studies. Schwann cells were immunostained with S-100 and species-specific p75(NGFR), major histocompatibility complex, and human leukocyte antigen antibodies. The number of proliferating cells, infiltrating Schwann cells, apoptotic cells, differentiated neuroblasts, and blood vessels in the sciatic nerve-engrafted NB tumors were compared to controls. Significantly more Schwann cells were detected in the sciatic nerve-engrafted NB xenografts than controls (P < 0.001). The infiltrating Schwann cells were S-100-positive and reacted with anti-mouse major histocompatibility complex class Ib and p75(NGFR) but not anti-human p75(NGFR) and human leukocyte antigen class I antibodies. The sciatic nerve-engrafted tumors also had lower numbers of proliferating neuroblasts, higher numbers of differentiated neuroblasts and apoptotic cells, and decreased vascular density compared to controls. Our results indicate that infiltrating Schwann cells of mouse origin are capable of promoting human neuroblast differentiation, inducing apoptosis, and inhibiting proliferation and angiogenesis in vivo.