Progenitor cell therapy is a potential new treatment option for ischemic conditions in the myocardium and skeletal muscles. However, it remains unclear whether umbilical cord blood (UCB)-derived progenitor cells can provide therapeutic effects in ischemic muscles and whether ex vivo gene transfer can be used for improving the effect. In this study, the use of a lentiviral vector led to efficient transduction of both UCB-derived hematopoietic stem cells (HSCs) and mesenchymal stem cells (MSCs). Our method resulted in a long-term transgene expression and did not alter the differentiation potential of either HSCs or MSCs. In addition, we studied the therapeutic potential of CD133(+) and MSC progenitor cells transduced ex vivo with lentiviruses encoding the mature form of vascular endothelial growth factor D (VEGF-D(DeltaNDeltaC)) or the enhanced green fluorescent protein (eGFP) marker gene in a nude mouse model of skeletal muscle ischemia. Progenitor cells enhanced the regeneration of ischemic muscles without a detectable long-term engraftment of either CD133(+) or MSC progenitor cells. Our results show that, rather than directly participating in angiogenesis or skeletal myogenesis, UCB-derived progenitor cells indirectly enhance the regenerative capacity of skeletal muscle after acute ischemic injury. However, VEGF-D gene transfer of progenitor cells did not improve the therapeutic effect in ischemic muscles.