Previously, we showed silicone nerve conduits containing a vascular bundle and decellularized allogenic basal laminae (DABLs) seeded with bone marrow-derived mesenchymal stem cells (BMSCs) demonstrated successful nerve regeneration. Nerve conduits should be flexible and biodegradable for clinical use. In the current study, we used nerve conduits made of polyglycoric acid (PGA) fiber mesh, which is flexible, biodegradable and capillary-permeable. DABLs were created using chemical surfactants to remove almost all cell debris. In part 1, capillary infiltration capability of the PGA tube was examined. Capillary infiltration into regenerated neural tissue was compared between the PGA tube with blood vessels attached extratubularly (extratubularly vascularized tube) and that containing blood vessels intratubularly (intratubularly vascularized tube). No significant difference was found in capillary formation or nerve regeneration between these two tubes. In part 2, a 20 mm gap created in a rat sciatic nerve model was bridged using the extratubularly vascularized PGA tube containing the DABLs with implantation of isogenic cultured BMSCs (TubeC+ group), that containing the DABLs without implantation of the BMSCs (TubeC- group), and 20 mm-long fresh autologous nerve graft (Auto group). Nerve regeneration in these three groups was assessed electrophysiologically and histomorphometrically. At 24 weeks, there was no significant difference in any electrophysiological parameters between TubeC+ and Auto groups, although all histological parameters in Auto group were significantly greater than those in TubeC+ and TubeC- groups, and TubeC+ group demonstrated significant better nerve regeneration than TubeC- group. The transplanted DABLs showed no signs of immunological rejection and some transplanted BMSCs were differentiated into cells with Schwann cell-like phenotype, which might have promoted nerve regeneration within the conduit. This study indicated that the TubeC+ nerve conduit may become an alternative to nerve autograft.