After injury, the CNS undergoes an astrocyte stress response characterized by reactive astrocytosis/proliferation, boundary formation, and increased glial fibrillary acidic protein (GFAP) and chondroitin sulfate proteoglycan (CSPG) expression. Previously, we showed that in vitro astrocytes exhibit this stress response when in contact with Schwann cells but not olfactory ensheathing cells (OECs). In this study, we confirm this finding in vivo by demonstrating that astrocytes mingle with OECs but not Schwann cells after injection into normal spinal cord. We show that Schwann cell-conditioned media (SCM) induces proliferation in monocultures of astrocytes and increases CSPG expression in a fibroblast growth factor receptor 1 (FGFR1)-independent manner. However, SCM added to OEC/astrocyte cocultures induces reactive astrocytosis and boundary formation, which, although sensitive to FGFR1 inhibition, was not induced by FGF2 alone. Addition of heparin to OEC/astrocyte cultures induces boundary formation, whereas heparinase or chlorate treatment of Schwann cell/astrocyte cultures reduces it, suggesting that heparan sulfate proteoglycans (HSPGs) are modulating this activity. In vivo, FGF2 and FGFR1 immunoreactivity was increased over grafted OECs and Schwann cells compared with the surrounding tissue, and HSPG immunoreactivity is increased over reactive astrocytes bordering the Schwann cell graft. These data suggest that components of the astrocyte stress response, including boundary formation, astrocyte hypertrophy, and GFAP expression, are mediated by an FGF family member, whereas proliferation and CSPG expression are not. Furthermore, after cell transplantation, HSPGs may be important for mediating the stress response in astrocytes via FGF2. Identification of factors secreted by Schwann cells that induce this negative response in astrocytes would further our ability to manipulate the inhibitory environment induced after injury to promote regeneration.