Schwann cells are important components of the peripheral glia that form myelin, serving as the microenvironment of nerve fibers in the peripheral nervous system (PNS). Damage to the PNS induces the differentiation and activation of Schwann cells to produce factors that strongly promote axonal regrowth, and subsequently contribute to remyelination, which is crucial for the recovery of function. Although the collection and transplantation of native Schwann cells are effective for the treatment of neural diseases, isolation of Schwann cells results in new damage to other peripheral nerve segments and causes undesirable iatrogenic injury in the donor. Furthermore, the expansion of native Schwann cells to obtain a sufficient number of cells for clinical application within a reasonable period is technically difficult. Therefore, a method to induce easily accessible and highly proliferative cells to differentiate into cells with Schwann cell properties would be very practical and is highly desirable. Recently, regenerative medicine has focused on mesenchymal stem cells because they are easily accessible from various kinds of mesenchymal tissues such as the umbilical cord, bone marrow, and fat tissue. Mesenchymal stem cells are highly proliferative and it is easy to obtain an adequate number of cells. Notably, while mesenchymal stem cells are mesodermal lineage cells, they have an ability to cross oligolineage boundaries previously thought uncrossable to achieve transdifferentiation. In this review, we focus on the potential of mesenchymal stem cells, particularly umbilical cord-derived mesenchymal stem cells, to differentiate into functional Schwann cells, and discuss the prospective clinical application of these cells to PNS regeneration.