Aim: We aim to explore the repair effect of combined cell therapy using activated Schwann cells (ASCs) and bone mesenchymal stem cells (BMSCs) in traumatic spinal cord injury (SCI) in rats. Materials & methods: ASCs and BMSCs were used for combined transplantation to treat acute SCI in rats, both of which can be obtained from SCI patients. ASCs were obtained by prior ligation of saphenous nerve and BMSCs by flush of the marrow cavity with Dulbeccos modified Eagles medium solution. Our experiment in vitro confirmed that ASCs promoted BMSCs to differentiate into mature neural cells. It also indicates that BMSCs hold the potential to repair CNS injury. ASCs and BMSCs were co-transplanted into the injured epicenter of spinal cord made by the New York University (NYU) impactor machine using a 10 g × 50 mm drop weight. Complete ASCs, BMSCs and Dulbeccos modified Eagles medium were also transplanted in rats with SCI as a control. Recovery of rats hindlimb function was serially evaluated by Basso, Beattie, Bresnahan locomotor rating scale and footprint analysis. Changes of neurological potential were recorded by nerve electrophysiologic test. Improvement in the microenvironment of the injured spinal cord was evaluated by hematoxylin and eosin staining, glial fibrillary acidic protein staining, biotinylated dextran amine anterograde tracing and electron microscopy. Results: Using biotinylated dextran amine anterograde tracing, we demonstrated that there were more regenerative axons of corticospinal tract surrounding and passing through the injured cavity to the caudal cord in the ASC-BMSC co-graft group than those in the other three groups, and we also confirmed this further by quantitative analysis. Immunostaining for glial fibrillary acidic protein showed the smallest population of astrocytes in the injury epicenter in the ASC-BMSC group compared with the other three groups. Relatively complete myelin sheaths and organelles were found in the ASC-BMSC group compared with the other three groups under electron microscopy. Conclusion: Effective co-transplantation of ASCs and BMSCs promotes functional recovery in rats hindlimbs and reduces the formation of glial scar, and remyelinates the injured axons as compared with the other three groups. This conclusion was also supported by the observation of immunohistochemistry staining and electron microscopy, suggesting the possible clinical application for the treatment of spinal injury. © 2011 Future Medicine Ltd.