Demyelination occurs in several central nervous system (CNS) disorders, including multiple sclerosis, viral infection and spinal cord injury and can result in severe functional impairment. Therefore there is great interest in developing therapies promoting repair in CNS demyelinating diseases and trauma. Cell replacement therapy is an attractive approach for myelin repair, and experimental transplantation has provided convincing evidence of the repair potential of grafted myelin-forming cells. Schwann cells (SCs), oligodendrocyte progenitors, olfactory ensheathing cells and embryonic and neural stem cells have been shown to form myelin after transplantation into the demyelinated CNS. SCs are among the most promising candidates for autologous grafting. They can remyelinate spinal cord lesions after experimental demyelination, leading in some cases to functional recovery in rodent and primate models. However, SCs do not normally enter the CNS, and migration of SCs transplanted in CNS white matter is inhibited by astrocytes. As SC migration and myelination is mediated by interactions of sets of extracellular matrix molecules with cell surface molecules, genetic engineering of SCs to alter aspects of these interactions is a possible way forward. Thus efforts towards the development of SC-based therapies are focused in enhancing their migration and functional integration into the lesioned CNS. In addition, efforts are being made to use these cells as gene delivery vehicles for an array of molecules with repair potential. In this review we summarize data from the recent literature regarding the use of SCs in CNS repair and discuss the prospects for future therapeutic applications.