The neuropeptides galanin and pituitary adenylate cyclase-activating peptide (PACAP) are markedly up-regulated in response to peripheral nerve lesion. Both peptides are involved in neuronal differentiation and neurite outgrowth during development. In this study, we investigated the effects of galanin and PACAP on axonal elongation and sprouting by adult rat sensory neurones in vitro and facial motor neurones in vivo. Dissociated rat dorsal root ganglion neurones were plated on laminin substrate and analysed morphometrically. Both the mean axonal length and the number of branch points significantly increased in the presence of galanin or PACAP (2–5 µm). Effects on axonal collateralization were investigated in the rat facial nerve lesion model by direct application of the peptides to collagen-filled conduits entubulating the transected facial nerve stumps. Triple retrograde labelling of brainstem neurones confirmed that the peptides potently induce axonal sprouting of cranial motor neurones. The number of neurones regenerating into identified rami of the facial nerve increased up to fivefold. Biometrical analysis of whisking behaviour revealed that galanin and PACAP impaired the functional outcome when compared with vehicle-treated animals 8 weeks after surgery. In conclusion, although galanin and PACAP have been established as neurotrophic molecules with respect to axonal development and regeneration, their potential as treatments for peripheral nerve lesions appears limited because of the extensive stimulation of collateral axon branching. These branches are misrouted towards incorrect muscles and cause impairment in their coordinated activity.