Peyronie's disease (PD) has frequently been associated with erectile dysfunction (ED) and may further compromise coitus. To investigate the efficacy of intratunical injection of genetically modified rat adipose tissue-derived stem cells (ADSCs) expressing human interferon α-2b (ADSCs-IFN) in decreasing fibrosis and restoring erectile function in a rat model of tunica albugineal fibrosis (TAF). A total of 36 Sprague-Dawley rats (12 weeks old; 300-350 g) were randomly divided in six equal groups: (i) sham group (50 μL saline-injected into the tunica albuginea [TA]); (ii) TAF group (transforming growth factor [TGF]-β1 [0.5 μg/50 μL] injected into the TA); (iii) TGF-β1 plus 5 × 10(5) control ADSCs injected same day; (iv) TGF-β1 plus 5 × 10(5) ADSCs-IFN injected same day; (v) TGF-β1 plus 5 × 10(5) control ADSCs injected after 30 days; and (vi) TGF-β1 plus 5 × 10(5) ADSCs-IFN injected after 30 days. Rat allogeneic ADSCs were harvested from inguinal fat tissue. Forty-five days following the TGF-β1 injection, erectile function was assessed, and penile tissues were harvested for further evaluations. In the same-day injection groups, intratunical injection of ADSCs and ADSC-IFN improved erectile response observed upon stimulation of cavernous nerve compared with TAF group. Intratunical ADSC-IFN injection at day 30 improved erectile responses 3.1, 1.8, and 1.3 fold at voltages of 2.5, 5.0, and 7.0, respectively, when compared with TAF group. Furthermore, at voltages of 2.5 and 5.0, treatment on day 30 with ADSCs-IFN improved erectile responses 1.6- and 1.3-fold over treatment with ADSCs alone. Local injection of ADSCs or ADSCs-IFN reduced Peyronie's-like manifestations, and these effects might be associated with a decrease in the expression of tissue inhibitors of metalloproteinases. This study documents that transplantation of genetically modified ADSCs, with or without human IFN α-2b, attenuated Peyronie's-like changes and enhanced erectile function in a rat model of TAF.