Critical-sized peripheral nerve injuries pose a significant clinical challenge and lead to functional loss and disability. Current regeneration strategies, including autografts, synthetic nerve conduits, and biologic treatments, encounter challenges such as limited availability, donor site morbidity, suboptimal recovery, potential immune responses, and sustained stability and bioactivity. An obstacle in peripheral nerve regeneration is the immune response that can lead to inflammation and scarring that impede the regenerative process. Addressing both the immunological and regenerative needs is crucial for successful nerve recovery. Here, we introduce a novel biodegradable tacrolimus-eluting nerve guidance conduit engineered from a blend of poly (L-lactide-co-caprolactone) to facilitate peripheral nerve regeneration and report the testing of this conduit in 15-mm critical-sized gaps in the sciatic nerve of rats. The conduit's diffusion holes enable the local release of tacrolimus, a potent immunosuppressant with neuro-regenerative properties, directly into the injury site. A series of in vitro experiments were conducted to assess the ability of the conduit to maintain a controlled tacrolimus release profile that could promote neurite outgrowth. Subsequent in vivo assessments in rat models of sciatic nerve injury revealed significant enhancements in nerve regeneration, as evidenced by improved axonal growth and functional recovery compared to controls using placebo conduits. These findings indicate the synergistic effects of combining a biodegradable conduit with localized, sustained delivery of tacrolimus, suggesting a promising approach for treating peripheral nerve injuries. Further optimization of the design and long-term efficacy studies and clinical trials are needed before the potential for clinical translation in humans can be considered.