Recent studies describe taxol as a candidate treatment for promoting central nerve regeneration. However, taxol has serious side effects including peripheral neurotoxicity, and little information is known about the effect of taxol on peripheral nerve regeneration. We investigated the effects of taxol on regeneration in a rat sciatic nerve transection model. Rats were divided into four groups (n = 10): normal saline (i.p.) as the control, Cremophor EL vehicle, and 2 or 6 mg/kg of taxol in the Cremophor EL solution (four times in day-2, 4, 6, and 8), respectively. We evaluated neuronal electrophysiology, animal behaviour, neuronal connectivity, macrophage infiltration, location and expression levels of calcitonin gene-related peptide (CGRP), and expression levels of both nerve growth factors and immunoregulatory factors. In the high-dose taxol group (6 mg/kg), neuronal electrophysiological function was significantly impaired. Licking latencies were significantly changed while motor coordination was unaffected. Neuronal connectivity, macrophage density, and expression levels of CGRP was dramatically reduced. Expression levels of nerve growth factors and immunoregulatory factors was also reduced, while it was increased in the low-dose taxol group (2 mg/kg). These results indicate that taxol can modulate local inflammatory conditions, impair nerve regeneration, and impede recovery of a severe peripheral nerve injury.