Peripheral nerve repair outcomes are suboptimal in the presence of severe soft tissue injury and excessive scarring paralleling the process in tendon reconstruction of the hand. Inspired by the advantages of the two-stage technique in tendon grafting and with encouraging preliminary results, we aimed to investigate the two-stage nerve grafting technique as an alternative method of secondary nerve repair. Thirty female rats (~200 g) were randomly distributed into two groups (n=15). A 15 mm gap was created in the sciatic nerve of the animals and an excessive extraneural scar was induced using the "mincing" method. In this method, a thin strip of muscle was removed, minced in a petri dish and returned to the peripheral nerve. In the two-stage nerve graft group, a silicone tube was interposed in the first stage. After 4 weeks, in the second stage, the silicone tube was removed and a median nerve autograft was interposed through the newly formed vascularized sheath. In the conventional graft group, two nerve ends were protected with silicone caps in the first stage. After 4 weeks the caps were removed and the median graft was interposed. Behavioral assessments were performed at week 15 after surgery with the withdrawal reflex latency (WRL) and extensor postural thrust (EPT) and at the 3, 6 and 15-week time points with the TOA (toe out angle). Masson Trichrome staining method was used for histological assessments at week 15. According to the EPT and WRL, the two-stage nerve graft showed significant improvement (P=0.020 and P=0.017 respectively). The TOA showed no significant difference between the two groups. The total vascular index was significantly higher in the two-stage nerve graft group (P<0.001). Two-stage nerve graft using a silicone tube enhances vascularity of the graft and improves functional recovery.