Olfactory ensheathing cells (OECs) represent an exciting possibility for promoting axonal regeneration within the injured spinal cord. A number of studies have indicated the ability of these cells to promote significant reactive sprouting of injured axons within the injured spinal cord, and in some cases restoration of functional abilities. However, the cellular and/or molecular mechanisms OECs use to achieve this are unclear. To investigate such mechanisms, we report for the first time the ability of OECs to promote post-injury neurite sprouting in an in vitro model of axonal injury. Using this model, we were able to differentiate between the direct and indirect mechanisms underlying the ability of OECs to promote neuronal recovery from injury. We noted that OECs appeared to act as a physical substrate for the growth of post-injury neurite sprouts. We also found that while post-injury sprouting was promoted most when OECs were allowed to directly contact injured neurons, physical separation using tissue culture inserts (1 μm pore size, permeable to diffusible factors but not cells) did not completely block the promoting properties of OECs, suggesting that they also secrete soluble factors which aid post-injury neurite sprouting. Furthermore, this in vitro model allowed direct observation of the cellular interactions between OECs and sprouting neurites using live-cell-imaging techniques. In summary, we found that OECs separately promote neurite sprouting by providing a physical substrate for growth and through the expression of soluble factors. Our findings provide new insight into the ability of OECs to promote axonal regeneration, and also indicate potential targets for manipulation of these cells to enhance their restorative ability.