Peripheral nerve regeneration requires coordinated functions of supporting cells (e.g. Schwann cells) and neurotrophic factors such as glial cell line-derived neurotrophic factor (GDNF), but nerve regeneration is usually far from complete. Here we constructed a Cre/loxP-based hybrid baculovirus (BV) vector which enabled intracellular formation of episomal DNA minicircle for effective transduction of rat adipose-derived stem cells (ASCs) and prolonged expression of functional GDNF capable of recruiting Schwann cells. The GDNF expression persisted for >20 days with the peak level ( approximately 128 ng/ml) tremendously exceeding the picogram levels of GDNF secreted by neuroprogenitor cells. We further developed a facile method to fabricate and transduce cell sheets composed of undifferentiated ASCs in 2 days, without the need of thermo-responsive polymer commonly used for cell sheet fabrication. Implantation of the hybrid BV-engineered, GDNF-expressing ASCs sheets into sciatic nerve transection site in rats significantly improved the nerve repair, as judged from the enhanced functional recovery, nerve reinnervation, electrophysiological functionality, Schwann cells proliferation/infiltration, axon regeneration, myelination and angiogenesis. The hybrid BV is able to functionalize ASCs sheets by intracellular episomal DNA minicircle formation that circumvents undesired gene integration, and the ASCs sheets fabrication is rapid and simple. These data and features implicate the potentials of ASCs sheets functionalized by the hybrid BV for peripheral nerve regeneration.