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Chondroitinase-ABC (ChABC) was applied to a cervical level 5 (C5) dorsal quadrant aspiration cavity of the adult rat spinal cord to degrade the local accumulation of inhibitory chondroitin sulfate proteoglycans. The intent was to enhance the extension of regenerated axons from the distal end of a peripheral nerve (PN) graft back into the C5 spinal cord, having bypassed a hemisection lesion at C3. ChABC-treated rats showed (1) gradual improvement in the range of forelimb swing during locomotion, with some animals progressing to the point of raising their forelimb above the nose, (2) an enhanced ability to use the forelimb in a cylinder test, and (3) improvements in balance and weight bearing on a horizontal rope. Transection of the PN graft, which cuts through regenerated axons, greatly diminished these functional improvements. Axonal regrowth from the PN graft correlated well with the behavioral assessments. Thus, many more axons extended for much longer distances into the cord after ChABC treatment and bridge insertion compared with the control groups, in which axons regenerated into the PN graft but growth back into the spinal cord was extremely limited. These results demonstrate, for the first time, that modulation of extracellular matrix components after spinal cord injury promotes significant axonal regeneration beyond the distal end of a PN bridge back into the spinal cord and that regenerating axons can mediate the return of useful function of the affected limb.