Regeneration of the perineurium after crush injury to the rat sciatic nerve and after autografting was studied in an experimental model. After injury, fibroblast-like cells formed compartments inside the funiculus which gradually acquired the characteristics of the perineurial cell. After grafting, the pattern of perineural regeneration depended on the degree of Schwann cell damage. In the graft and distal nerve trunk the epineurium degenerated and disappeared and new perineural tissue was formed by endoneurial fibroblasts from the inside of the funiculus. At the suture line, fibroblasts encircled the regenerating axons and the Schwann cells to form new compartments resulting in a large number of minifasciles of regenerating nerve. The function of the perineurium as a diffusion barrier was restored satisfactorily in the crushed nerve, although there was no satisfactory repair at 30 weeks after nerve grafting.