The chondroitin sulphate proteoglycan NG2 blocks neurite outgrowth in vitro and thus may be able to inhibit axonal regeneration in the CNS. We have used immunohistochemistry to compare the expression of NG2 in the PNS, where axons regenerate, and the spinal cord, where regeneration fails. NG2 is expressed by satellite cells in dorsal root ganglia (DRG) and in the perineurium and endoneurium of intact sciatic nerves of adult rats. Endoneurial NG2-positive cells were S100-negative. Injury to dorsal roots, ventral rami or sciatic nerves had no effect on NG2 expression in DRG but sciatic nerve section or crush caused an upregulation of NG2 in the damaged nerve. Strongly NG2-positive cells in damaged nerves were S100-negative. The proximal stump of severed nerves was capped by dense NG2, which surrounded bundles of regenerating axons. The distal stump, into which axons regenerated, also contained many NG2-positive/S100-negative cells. Immunoelectron microscopy revealed that most NG2-positive cells in distal stumps had perineurial or fibroblast-like morphologies, with NG2 being concentrated at the poles of the cells in regions exhibiting microvillus-like protrusions or caveolae. Compression and partial transection injuries to the spinal cord also caused an upregulation of NG2, and NG2-positive cells and processes invaded the lesion sites. Transganglionically labelled ascending dorsal column fibres, stimulated to sprout by a conditioning sciatic nerve injury, ended in the borders of lesions among many NG2-positive processes. Thus, NG2 upregulation is a feature of the response to injury in peripheral nerves and in the spinal cord, but it does not appear to limit regeneration in the sciatic nerve.