Cell-based therapies provide a clinically applicable and available alternative to nerve autografts. Our previous studies have characterised rat-derived mesenchymal stem cells (MSC) and here we have investigated the phenotypic, molecular and functional characteristics of human-derived MSC (hMSC) differentiated along a Schwann cell lineage. The hMSC were isolated from healthy human donors and the identity of the undifferentiated hMSC was confirmed by the detection of MSC specific cells surface markers. The hMSC were differentiated along a glial cell lineage using an established cocktail of growth factors including glial growth factor-2. Following differentiation, the hMSC expressed the key Schwann cell (SC) markers at both the transcriptional and translational level. More importantly, we show the functional effect of hMSC on neurite outgrowth using an in vitro co-culture model system with rat-derived primary sensory neurons. The number of DRG sprouting neurites was significantly enhanced in the presence of differentiated hMSC; neurite length and density (branching) were also increased. These results provide evidence that hMSC can undergo molecular, morphological and functional changes to adopt a SC-like behaviour and, therefore, could be suitable as SC substitutes for nerve repair in clinical applications.