Sustained release of proteins from aligned polymeric fibers holds great potential in tissue-engineering applications. These protein-polymer composite fibers possess high surface-area-to-volume ratios for cell attachment, and can provide biochemical and topographic cues to enhance tissue regeneration. Aligned biodegradable polymeric fibers that encapsulate human glial cell-derived neurotrophic factor (GDNF, 0.13 wt%) were fabricated via electrospinning a copolymer of caprolactone and ethyl ethylene phosphate (PCLEEP) with GDNF. The protein was randomly dispersed throughout the polymer matrix in aggregate form, and released in a sustained manner for up to two months. The efficacy of these composite fibers was tested in a rat model for peripheral nerve-injury treatment. Rats were divided into four groups, receiving either empty PCLEEP tubes (control); tubes with plain PCLEEP electrospun fibers aligned longitudinally (EF-L) or circumferentially (EF-C); or tubes with aligned GDNF-PCLEEP fibers (EF-L-GDNF). After three months, bridging of a 15 mm critical defect gap by the regenerated nerve was observed in all the rats that received nerve conduits with electrospun fibers, as opposed to 50% in the control group. Electrophysiological recovery was seen in 20%, 33%, and 44% of the rats in the EF-C, EF-L, and EF-L-GDNF groups respectively, whilst none was observed in the controls. This study has demonstrated that, without further modification, plain electrospun fibers can help in peripheral nerve regeneration; however, the synergistic effect of an encapsulated growth factor facilitated a more significant recovery. This study also demonstrated the novel use of electrospinning to incorporate biochemical and topographical cues into a single implant for in vivo tissue-engineering applications.