Abstract Reactive astrogliosis impedes axonal regeneration after injuries to the mammalian central nervous system (CNS). Here we report that glial cell line-derived neurotrophic factor (GDNF), combined with transplanted Schwann cells (SCs), effectively reversed the inhibitory properties of astrocytes at graft–host interfaces allowing robust axonal regeneration, concomitant with vigorous migration of host astrocytes into SC-seeded semi-permeable guidance channels implanted into a right-sided spinal cord hemisection at the 10th thoracic (T10) level. Within the graft, migrated host astrocytes were in close association with regenerated axons. Astrocyte processes extended parallel to the axons, implying that the migrated astrocytes were not inhibitory and might have promoted directional growth of regenerated axons. In vitro, GDNF induced migration of SCs and astrocytes toward each other in an astrocyte–SC confrontation assay. GDNF also enhanced migration of astrocytes on a SC monolayer in an inverted coverslip migration assay, suggesting that this effect is mediated by direct cell–cell contact between the two cell types. Morphologically, GDNF administration reduced astrocyte hypertrophy and induced elongated process extension of these cells, similar to what was observed in vivo. Notably, GDNF treatment significantly reduced production of glial fibrillary acidic protein (GFAP) and chondroitin sulfate proteoglycans (CSPGs), two hallmarks of astrogliosis, in both the in vivo and in vitro models. Thus, our study demonstrates a novel role of GDNF in modifying spinal cord injury (SCI)-induced astrogliosis resulting in robust axonal regeneration in adult rats.