Schwann cells play a crucial role in successful peripheral nerve repair and regeneration by supporting both axonal growth and myelination. Schwann cells are therefore a feasible option for cell therapy treatment of peripheral nerve injury. However, sourcing human Schwann cells at quantities required for development beyond research is challenging. Due to their availability, rapid in vitro expansion, survival, and integration within the host tissue, stem cells have attracted considerable attention as candidate cell therapies. Among them, induced pluripotent stem cells (iPSCs) with the associated prospects for personalized treatment are a promising therapy to take the leap from bench to bedside. In this critical review, we firstly focus on the current knowledge of the Schwann cell phenotype in regard to peripheral nerve injury, including crosstalk with the immune system during peripheral nerve regeneration. Then, we review iPSC to Schwann cell derivation protocols and the results from recent in vitro and in vivo studies. We finally conclude with some prospects for the use of iPSCs in clinical settings.