Background A basic fibroblast growth factor (bFGF) slow‐release system was combined to a biodegradable nerve conduit with the hypothesis this slow‐release system would increase the capacity to promote nerve vascularization and Schwann cell proliferation in a rat model. Materials and Methods Slow‐release of bFGF was determined using Enzyme‐Linked ImmunoSorbent Assay (ELISA). A total of 60 rats were used to create a 10 mm gap in the sciatic nerve. A polyglycolic acid‐based nerve conduit was used to bridge the gap, either without or with a bFGF slow‐release incorporated around the conduit (n = 30 in each group). At 2 (n = 6), 4 (n = 6), 8 (n = 6), and 20 (n = 12) weeks after surgery, samples were resected and subjected to histological, immunohistochemical, and transmission electron microscopic evaluation for nerve regeneration. Results Continuous release of bFGF was found during the observation period of 2 weeks. After in vivo implantation of the nerve conduit, greater endothelial cell migration and vascularization resulted at 2 weeks (proximal: 20.0 ± 2.0 vs. 12.7 ± 2.1, P = .01, middle: 17.3 ± 3.5 vs. 8.7 ± 3.2, P = .03). Schwann cells showed a trend toward greater proliferation and axonal growth had significant elongation (4.9 ± 1.1 mm vs. 2.8 ± 1.5 mm, P = .04) at 4 weeks after implantation. The number of myelinated nerve fibers, indicating nerve maturation, were increased 20 weeks after implantation (proximal: 83.3 ± 7.5 vs. 53.3 ± 5.5, P = .06, distal: 71.0 ± 12.5 vs. 44.0 ± 11.1, P = .04). Conclusions These findings suggest that the bFGF slow‐release system improves nerve vascularization and Schwann cell proliferation through the biodegradable nerve conduit.