During tendon injury, nerve ingrowth is one of the earliest events of tendon repair and remodeling. Since peripheral neurons and associated cells are mostly derived from neural crest (NC) cells, we sought to investigate the role of NC-derived cells in tendon regeneration. Thus, we used Sox10-Cre/ROSA26-Flox-Red Fluorescent Protein (RFP) transgenic mice to trace these cells during tendon regeneration. After 4 weeks of Achilles tendon rupture, the injured tendon tissues were harvested for immunohistological analyses, cell isolation, and phenotype identification. In addition, the tenocytes were co-cultured with RFP labeled cells to examine cellular functions. Following the injury, a significant number of RFP-labeled cells penetrated into the wound site and reached a peak (∼30% of cells) after 2 weeks, and then stabilized at a level of approximately 20%. Interestingly, 36.9% RFP labeled cells in the injured area expressed Tuj1, suggesting that most of the cells are peripheral neurons. Some RFP /Tuj1 cells were also found adjacent to newly formed blood vessels in the tendon. Importantly, the existing neuropeptide Y (NPY) and neuropeptide Y receptor (NPYr) in the invading nerve and blood vessels were directly correlated. In addition, there were also RFP cells (∼30%) negative for neuronal markers but positive for fibroblast markers, that is, FAP (34.7%) and Vimentin (Vmt) (27.2%), and approximately 10% positive for Sox10. Indeed, many RFP cells isolated from the ruptured Achilles tendon showed long spindle shapes and expressed fibroblast phenotypic markers FSP1 and FAP. Part of the Sox10 RFP-labeled cells exhibited osteogenic and adipogenic differentiation ability. It is concluded that after Achilles tendon injury, nerves sprout into the wound site. The NC-derived Vmt /FAP mesenchymal cells and peripheral nerves participate in tendon regeneration.