Neurotrophic factors such as the glial cell line-derived neurotrophic factor (GDNF) and brain-derived neurotrophic factor (BDNF) promote nerve cell survival and regeneration, but their efficacy in repairing a longer gap defect of rat sciatic nerve (15 mm) has not been established. In this study, two recombinant mammalian vectors containing either rat GDNF gene or BDNF gene were constructed and each was transfected into neural stem cells (NSCs). It was found that the transfection of GDNF or BDNF gene into NSCs led to significantly enhanced expression of GDNF or BDNF mRNA. The amount of GDNF or BDNF protein secreted from the transfected NSCs showed a 3.3-fold or 2.5-fold increase than that from nontransfected NSCs, respectively. The regeneration capacity of rat sciatic nerve in a poly(D,L-lactide) conduit seeded with GDNF or BDNF-transfected NSCs was evaluated by the histology, functional gait, and electrophysiology after 8 weeks of implantation. It was observed that the degree of myelination and the size of regenerated tissue in the conduits seeded with GDNF- and BDNF-transfected NSCs were higher than those seeded with the nontransfected NSCs. Conduits seeded with GDNF-transfected NSCs had the greatest number of blood vessels. The functional recovery assessed by the functional gait and electrophysiology was significantly improved for conduits seeded with GDNF or BDNF-transfected NSCs. It was concluded that the genetically modified NSCs may have potential applications in promoting nerve regeneration and functional recovery.