The effect of proximo-distal orientation of peripheral nerve grafts upon axonal regeneration has been investigated using the sciatic nerve of the rat as a model. To test the hypothesis that the presence of nerve branches within a graft will cause misdirection of axons in normally oriented grafts but not in reversed grafts, all grafts studied contained branches. Qualitative electron microscopic examination of graft ultrastructure revealed no differences in nerve structure related to graft orientation. In most normally oriented grafts, branches persisted up to 12 months after surgery. These branches contained axons which terminated at the end of the branch. In all reverse oriented grafts, and in a small number of normally oriented ones, the branches could not be seen after two or more months of regeneration. Axons sprouting outside of the epineurium of the graft caused the branch to be incorporated into the nerve structure. Axon counts in the distal stump of grafted nerves after twelve months recovery revealed that normally oriented grafts with persistent branches led to poorer peripheral regeneration, especially of unmyelinated fibers. The results indicate that regeneration of axons to their peripheral targets may be facilitated by reversing the graft orientation.