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Nerve allografts offer many advantages in the reconstruction of peripheral nerve gaps: they retain their native microstructure, contain pro-regenerative Schwann cells, are widely available, and avoid donor site morbidity. Unfortunately, clinical use of nerve allografts is limited by the need for systemic immunosuppression and its adverse effects. To eliminate the toxicity of the systemic immunosuppressant FK506, we developed a local FK506 drug delivery system (DDS) to provide drug release over 28 days. The study objective was to investigate if the local FK506 DDS enhances nerve regeneration in a rodent model of nerve gap defect reconstruction with immunologically-disparate nerve allografts. In male Lewis rats, a common peroneal nerve gap defect was reconstructed with either a 20 mm nerve isograft from a donor Lewis rat or a 20 mm fresh, unprocessed nerve allograft from an immunologically incompatible donor ACI rat. After 4 weeks of survival, nerve regeneration was evaluated using retrograde neuronal labelling, quantitative histomorphometry, and serum cytokine profile. Treatment with both systemic FK506 and the local FK506 DDS significantly improved motor and sensory neuronal regeneration, as well as histomorphometric indices including myelinated axon number. Rats with nerve allografts treated with either systemic or local FK506 had significantly reduced serum concentrations of the pro-inflammatory cytokine IL-12 compared to untreated vehicle control rats with nerve allografts. Serum FK506 levels were undetectable in rats with local FK506 DDS. The local FK506 DDS improved motor and sensory nerve regeneration through fresh nerve allografts to a level equal to that of either systemic FK506 or nerve isografting. This treatment may be clinically translatable in peripheral nerve reconstruction or vascularized composite allotransplantation. • Local FK506 delivery enhances axon regeneration through nerve autografts and allografts. • Local FK506 is as effective as systemic FK506 in preventing immune rejection of nerve allografts. • Systemic toxicity is not apparent with use of local FK506. [ABSTRACT FROM AUTHOR]