In spite of the extensive research using induced pluripotent stem (iPS) cells, the therapeutic potential of iPS cells in the treatment of peripheral nerve injury is largely unknown. In this study, we repaired peripheral nerve gaps in mice using tissue-engineered bioabsorbable nerve conduits coated with iPS cell-derived neurospheres. The secondary neurospheres derived from mouse iPS cells were suspended in each conduit (4000,000 cells per conduit) and cultured in the conduit in three-dimensional (3D) culture for 14 days. We then implanted them in the mouse sciatic nerve gaps (5 mm) (iPS group: n = 10). The nerve conduit alone was implanted in the control group (n = 10). After 4, 8 and 12 weeks, motor and sensory functional recovery in mice were significantly better in the iPS group. At 12 weeks, all the nerve conduits remained structurally stable without any collapse and histological analysis indicated axonal regeneration in the nerve conduits of both groups. However, the iPS group showed significantly more vigorous axonal regeneration. The bioabsorbable nerve conduits created by 3D-culture of iPS cell-derived neurospheres promoted regeneration of peripheral nerves and functional recovery in vivo. The combination of iPS cell technology and bioabsorbable nerve conduits shows potential as a future tool for the treatment of peripheral nerve defects. (C) 2012 Elsevier Inc. All rights reserved.