Peripheral nerves have the potential to regenerate axons and reinnervate end organs. Chronic denervation and disturbed nerve regeneration are thought to contribute to peripheral neuropathy, pain, and pruritus in the skin. The capacity of denervated distal nerves to support axonal regeneration requires proliferation by Schwann cells, which guide regenerating axons to their denervated targets. However, adult peripheral nerve Schwann cells do not retain a growth-permissive phenotype, as is required to produce new glia. Therefore, it is believed that following injury, mature Schwann cells dedifferentiate to a progenitor/stem cell phenotype to promote axonal regrowth. In this study, we show that skin-derived precursors (SKPs), a recently identified neural crest-related stem cell population in the dermis of skin, are an alternative source of progenitors for cutaneous nerve regeneration. Using in vivo and in vitro three-dimensional cutaneous nerve regeneration models, we show that the SKPs are neurotropic toward injured nerves and that they have a full capacity to differentiate into Schwann cells and promote axon regeneration. The identification of SKPs as a physiologic source of progenitors for cutaneous nerve regeneration in the skin, where SKPs physiologically reside, has important implications for understanding early cellular events in peripheral nerve regeneration. It also provides fertile ground for the elucidation of intrinsic and extrinsic factors within the nerve microenvironment that likely play essential roles in cutaneous nerve homeostasis.