Functional recovery after neurotmesis, a complete transection of the nerve fiber, is often poor and requires a surgical procedure. Especially for longer gaps (>3 mm), end-to-end suturing of the proximal to the distal part is not possible, thus requiring nerve graft implantation. Artificial nerve grafts, i.e., hollow fibers, hydrogels, chitosan, collagen conduits, and decellularized scaffolds hold promise provided that these structures are populated with Schwann cells (SC) that are widely accepted to promote peripheral and spinal cord regeneration. However, these cells must be collected from the healthy peripheral nerves, resulting in significant time delay for treatment and undesired morbidities for the donors. Therefore, there is a clear need to explore the viable source of cells with a regenerative potential similar to SC. For this, we analyzed the literature for the generation of Schwann cell-like cells (SCLC) from stem cells of different origins (i.e., mesenchymal stem cells, pluripotent stem cells, and genetically programmed somatic cells) and compared their biological performance to promote axonal regeneration. Thus, the present review accounts for current developments in the field of SCLC differentiation, their applications in peripheral and central nervous system injury, and provides insights for future strategies.