Previous research has demonstrated the feasibility of repairing nerve defects through acellular allogeneic nerve grafting with bone marrow mesenchymal stem cells. However, adult tissue-derived mesenchymal stem cells encounter various obstacles, including limited tissue sources, invasive acquisition methods, cellular heterogeneity, purification challenges, cellular senescence, and diminished pluripotency and proliferation over successive passages. In this study, we used induced pluripotent stem cell-derived mesenchymal stem cells, known for their self-renewal capacity, multilineage differentiation potential, and immunomodulatory characteristics. We used induced pluripotent stem cell-derived mesenchymal stem cells in conjunction with acellular nerve allografts to address a 10 mm-long defect in a rat model of sciatic nerve injury. Our findings reveal that induced pluripotent stem cell-derived mesenchymal stem cells exhibit survival for up to 17 days in a rat model of peripheral nerve injury with acellular nerve allograft transplantation. Furthermore, the combination of acellular nerve allograft and induced pluripotent stem cell-derived mesenchymal stem cells significantly accelerates the regeneration of injured axons and improves behavioral function recovery in rats. Additionally, our in vivo and in vitro experiments indicate that induced pluripotent stem cell-derived mesenchymal stem cells play a pivotal role in promoting neovascularization. Collectively, our results suggest the potential of acellular nerve allografts with induced pluripotent stem cell-derived mesenchymal stem cells to augment nerve regeneration in rats, offering promising therapeutic strategies for clinical translation.