Background: Olfactory ensheathing cells (OECs) can remyelinate injured spinal cord and the peripheral nerve system, but little is known about its effect on the transfected olfactory nerve. We investigated recovery of olfactory epithelium after transplanting allogeneic OECs in transected rat olfactory nerves. Material/Methods: Olfactory ensheathing cells from the olfactory bulb were cultured in DMEM/F-12 medium and purified with cytosine arabinoside (Arc-c). Forty Sprague-Dawley rats were divided into 2 groups; the left olfactory nerve was transected in all animals. In the transplant group, Dil-labeled OECs were injected into the gap between the dura and the cribriform plate (n=24); DMEM/F-12 medium was injected in control animals (n=16). Rats were subsequently killed for histologic examination. Olfactory evoked potentials (OEPs) were used to evaluate nerve conduction. Results: After transecting the olfactory nerve, there was no horseradish peroxidase staining in the olfactory bulb; some OEPs disappeared. Five days after surgery, there was no horseradish peroxidase staining in the olfactory bulb of any animal. Apoptotic cells appeared in the epithelium; the thickness and cell number of the olfactory epithelium were decreased. Two weeks later, the thickness and cell number of the olfactory epithelium increased gradually. Some horseradish peroxidase staining the olfactory bulb and OECs was detected; more growth associated protein-43 marked olfactory receptor neurons were visible. Six weeks after surgery, the cell number was greater in the transplant group (P < 0.05); there was no significant between-group difference regarding olfactory epithelium thickness. Conclusions: Transplanted OECs may be used to treat transected olfactory nerves.