Paucity of permissive molecules and abundance of inhibitory molecules in the injured spinal cord of adult mammals prevent axons from successful regeneration and, thus, contribute to the failure of functional recovery. Using an adeno-associated viral (AAV) vector, we expressed the regeneration-promoting cell adhesion molecule L1 in both neurons and glia in the lesioned spinal cord of adult mice. Exogenous L1, detectable already 1 week after thoracic spinal cord compression and immediate vector injection, was expressed at high levels up to 5 weeks, the longest time-period studied. Dissemination of L1-transduced cells throughout the spinal cord was wide, spanning over more than 10 mm rostral and 10 mm caudal to the lesion scar. L1 was not detectable in the fibronectin-positive lesion core. L1 overexpression led to improved stepping abilities and muscle coordination during ground locomotion over a 5-week observation period. Superior functional improvement was associated with enhanced reinnervation of the lumbar spinal cord by 5-HT axons. Corticospinal tract axons did not regrow beyond the lesion scar but extended distally into closer proximity to the injury site in AAV-L1-treated compared with control mice. The expression of the neurite outgrowth-inhibitory chondroitin sulphate proteoglycan NG2 was decreased in AAV-L1-treated spinal cords, along with reduction of the reactive astroglial marker GFAP. In vitro experiments confirmed that L1 inhibits astrocyte proliferation, migration, process extension and GFAP expression. Analyses of intracellular signalling indicated that exogenous L1 activates diverse cascades in neurons and glia. Thus, AAV-mediated L1 overexpression appears to be a potent means to favourably modify the local environment in the injured spinal cord and promote regeneration. Our study demonstrates a clinically feasible approach of promising potential.