Nerve regeneration following the injury of nerve tissue remains a major issue in the therapeutic medical field. Various bio-mimetic strategies are employed to direct the nerve growth in vitro, among which the chemical and topographical cues elicited by the scaffolds are crucial parameters that is primarily responsible for the axon growth and neurite extension involved in nerve regeneration. We carried out electrospinning for the first time, to fabricate both random and aligned nanofibers of Poly(3-hydroxybutyrate-co-3-hydroxyvalerate; PHBV) and composite PHBV/collagen nanofibers with fiber diameters in the range of 386–472 nm and 205–266 nm, respectively. To evaluate the potential of electrospun aligned nanofibers of PHBV and composite scaffolds as a substrate for nerve regeneration, we cultured nerve cells (PC12) and studied the biocompatibility effect along with neurite extension by immunostaining studies. Cell proliferation assays showed 40.01% and 5.48% higher proliferation of nerve cells on aligned PHBV/Coll50:50 nanofibers compared to cell proliferation on aligned PHBV and PHBV/Col75:25 nanofibers, respectively. Aligned nanofibers of PHBV/Coll provided contact guidance to direct the orientation of nerve cells along the direction of the fibers, thus endowing elongated cell morphology, with bi-polar neurite extensions required for nerve regeneration. Results showed that aligned PHBV/Col nanofibers are promising substrates than the random PHBV/Col nanofibers for application as bioengineered grafts for nerve tissue regeneration. Biotechnol. Bioeng. 2013;110: 2775–2784. © 2013 Wiley Periodicals, Inc.