Schwann cell (SC) transplantation is currently being discussed as a strategy that may promote functional recovery in patients with multiple sclerosis (MS) and other inflammatory demyelinating diseases of the central nervous system (CNS). However this assumes they will not only survive but also remyelinate demyelinated axons in the chronically inflamed CNS. To address this question we investigated the fate of transplanted SCs in myelin oligodendrocyte glycoprotein (MOG)-induced experimental autoimmune encephalomyelitis (EAE) in the Dark Agouti rat; an animal model that reproduces the complex inflammatory demyelinating immunopathology of MS. We now report that SCs expressing green fluorescent protein (GFP-SCs) allografted after disease onset not only survive but also migrate to remyelinate lesions in the inflamed CNS. GFP-SCs were detected more frequently in the parenchyma after direct injection into the spinal cord, than via intra-thecal delivery into the cerebrospinal fluid. In both cases the transplanted cells intermingled with astrocytes in demyelinated lesions, aligned with axons and by twenty one days post transplantation had formed Pzero protein immunoreactive internodes. Strikingly, GFP-SCs transplantation was associated with marked decrease in clinical disease severity in terms of mortality; all GFP-SCs transplanted animals survived whilst 80% of controls died within 40 days of disease.