Objective. Our previous study demonstrated that the transcription factor, Krfippel-like Factor 7 (KLF7), stimulates axon regeneration following peripheral nerve injury. In the present study, we used a gene therapy approach to overexpress KLF7 in bone marrow-derived stem/stromal cells (BMSCs) as support cells, combined with acellular nerve allografts (ANAs) and determined the potential therapeutic efficacy of a KLF7-transfected BMSC nerve graft transplantation in a rodent model for sciatic nerve injury and repair. Approach. We efficiently transfected BMSCs with adeno-associated virus (AAV)-KLF7, which were then seeded in ANAs for bridging sciatic nerve defects. Main results. KLF7 overexpression promotes proliferation, survival, and Schwann-like cell differentiation of BMSCs in vitro. In vivo, KLF7 overexpression promotes transplanted BMSCs survival and myelinated fiber regeneration in regenerating ANAs; however, KLF7 did not improve Schwann-like cell differentiation of BMSCs within in the nerve grafts. KLF7-BMSCs significantly upregulated expression and secretion of neurotrophic factors by BMSCs, including nerve growth factor, ciliary neurotrophic factor, brain-derived neurotrophic factor, and glial cell line-derived neurotrophic factor in regenerating ANA. KLF7-BMSCs also improved motor axon regeneration, and subsequent neuromuscular innervation and prevention of muscle atrophy. These benefits were associated with increased motor functional recovery of regenerating ANAs. Significance. Our findings suggest that KLF7-BMSCs promoted peripheral nerve axon regeneration and myelination, and ultimately, motor functional recovery. The mechanism of KLF7 action may be related to its ability to enhance transplanted BMSCs survival and secrete neurotrophic factors rather than Schwann-like cell differentiation. This study provides novel foundational data connecting the benefits of KLF7 in neural injury and repair to BMSC biology and function, and demonstrates a potential combination approach for the treatment of injured peripheral nerve via nerve graft transplant.