Although the peripheral nerve is capable of regeneration, only a small minority of patients regain normal function after surgical reconstruction of a major peripheral nerve lesion, resulting in a severe and lasting negative impact on the quality of life. Glial cell-line derived neurotrophic factor (GDNF) has potent survival- and outgrowth-promoting effects on motoneurons, but locally elevated levels of GDNF cause trapping of regenerating axons and the formation of nerve coils. This phenomenon has been called the "candy store" effect. In this study we created gradients of GDNF in the sciatic nerve after a ventral root avulsion. This approach also allowed us to study the effect of increasing concentrations of GDNF on Schwann cell proliferation and morphology in the injured peripheral nerve. We demonstrate that lentiviral vectors can be used to create a 4 cm long GDNF gradient in the intact and lesioned rat sciatic nerve. Nerve coils were formed throughout the gradient and the number and size of the nerve coils increased with increasing GDNF levels in the nerve. In the nerve coils, Schwann cell density is increased, their morphology is disrupted and myelination of axons is severely impaired. The total number of regenerated and surviving motoneurons is not enhanced after the distal application of a GDNF gradient, but increased sprouting does result in higher number of motor axon in the distal segment of the sciatic nerve. These results show that lentiviral vector mediated overexpression of GDNF exerts multiple effects on both Schwann cells and axons and that nerve coil formation already occurs at relatively low concentrations of exogenous GDNF. Controlled expression of GDNF, by using a viral vector with regulatable GDNF expression, may be required to avoid motor axon trapping and to prevent the effects on Schwann cell proliferation and myelination.