The best available treatment of peripheral nerve lesions involves transplantation of an autologous nerve. This approach, however, entails sensory deficits at the donor site and requires additional surgery. Such limitations have motivated the search for a bioengineering solution to design artificial implants. For this purpose we are producing orientated biodegradable microfibers of poly(?-caprolactone) (PCL) with electrospinning. The present study describes the functionalization of these electrospun fibers with biologically active peptides to produce guidance structures for Schwann cell migration and axonal regeneration. For the chemical modification PCL was blended with star-shaped NCO-poly(ethylene glycol)-stat-poly(propylene glycol) (PCL/sPEG) as a covalent linker for the peptide GRGDS, derived from extracellular matrix proteins. To test biological functions of electrospun fibers, Schwann cell migration and axonal growth from dorsal root ganglia explants were investigated with time lapse video microscopy. Migrating Schwann cells as well as growing sensory axons closely followed the electrospun fibers with occasional leaps between adjacent fibers. Cell migration was characterized by frequent changes in velocity and direction reversals. Comparison of substrates showed that functionalized fibers caused more Schwann cells to move out of the explants, supported faster cell migration and axonal growth than the nonfunctional fibers. Using inhibitors of intracellular signaling kinases, we found that these biological effects required activation of the phosphatidyl inositol-3-kinase pathway. Since sPEG-containing fibers also showed low levels of nonspecific protein adsorption, which is desirable in the context of artificial implant design, the peptide modification of fibers appears to provide good substrates for nerve repair.