Pituitary adenylate cyclase-activating polypeptide (PACAP) is a neuroprotective peptide expressed in the central nervous system. Although many studies have shown a neuroprotective effect of PACAP, the mechanism of PACAP in the treatment of spinal cord injury (SCI) is yet to be elucidated. The purpose of this study was to examine the efficacy and underlying mechanism of PACAP in a mouse SCI model where PACAP was delivered via a biodegradable hydrogel. When PACAP or saline was delivered immediately after SCI, the functional motor recovery 14 days after SCI was significantly improved in the PACAP group compared with that in the saline group. Expression levels of messenger RNA (mRNA) for collapsin response mediator protein 2 (CRMP2), a factor related to axonal regeneration, were increased in the PACAP group 14 days after SCI compared with those in the saline group. A significantly increased number of CRMP2-positive cells were observed around the injury lesion in the PACAP group, while CRMP2 co-labeling with neuronal and oligodendrocyte markers was detected in intact spinal cord. Fourteen days after SCI, anterograde tracing revealed that a significantly increased number of neuronal fibers extended caudally from the lesion epicenter in the PACAP group. These results suggest that PACAP stimulates functional motor recovery after SCI through axonal regeneration mediated by CRMP2.