We use peripheral nerve regeneration as a model to address the critical issues of using induced pluripotent stem cells (iPSCs) and their derivatives for tissue regeneration. In the past year, we have made progress in all three Specific Aims. We generated 5 new integration-free IPSC lines by using episomal reprogramming. We also tested the methods of using biomaterials and chemical compounds to reprogram cells, in the presence or absence of transcriptional factors. We have derived and characterized additional neural crest stem cell (NCSC) lines from these new iPSC lines, and demonstrated that these NCSCs are multipotent in their differentiation potential. To investigate the mechanisms of how NCSCs enhanced the functional recovery of transected sciatic nerves, we examined the effects of paracrine signaling, cell differentiation and matrix stiffness. In vivo experiments showed that transplanted cells secreted neurotrophic factors to promote axon regeneration. In addition, NCSCs differentiated into Schwann cells to enhance myelination. The stiffness of extracellular matrix (ECM) indeed has effect on NCSC differentiation.