Schwann cell (SC) transplantation following spinal cord injury (SCI) may have therapeutic potential. Functional recovery is limited however, due to poor SC interactions with host astrocytes and the induction of astrogliosis. Olfactory ensheathing cells (OECs) are closely related to SCs, but intermix more readily with astrocytes in culture and induce less astrogliosis. We previously demonstrated that OECs express higher levels of sulfatases, enzymes that remove 6-O-sulfate groups from heparan sulphate proteoglycans, than SCs and that RNAi knockdown of sulfatase prevented OEC-astrocyte mixing in vitro. As human OECs are difficult to culture in large numbers we have genetically engineered SCs using lentiviral vectors to express sulfatase 1 and 2 (SC-S1S2) and assessed their ability to interact with astrocytes. We demonstrate that SC-S1S2s have increased integrin-dependent motility in the presence of astrocytes via modulation of NRG and FGF receptor-linked PI3K/AKT intracellular signaling and do not form boundaries with astrocytes in culture. SC-astrocyte mixing is dependent on local NRG concentration and we propose that sulfatase enzymes influence the bioavailability of NRG ligand and thus influence SC behavior. We further demonstrate that injection of sulfatase expressing SCs into spinal cord white matter results in less glial reactivity than control SC injections comparable to that of OEC injections. Our data indicate that sulfatase-mediated modification of the extracellular matrix can influence glial interactions with astrocytes, and that SCs engineered to express sulfatase may be more OEC-like in character. This approach may be beneficial for cell transplant-mediated spinal cord repair. GLIA 2016.