Wallerian degeneration is an active process of degeneration that results when a nerve fiber is cut or crushed and the part of the axon distal to the injury (which in most cases is farther from the neuron's cell body) degenerates. A related process of dying back or retrograde degeneration known as 'Wallerian-like degeneration' occurs in many neurodegenerative diseases, especially those where axonal transport is impaired such as ALS and Alzheimer's disease. Primary culture studies suggest that a failure to deliver sufficient quantities of the essential axonal protein NMNAT2 is a key initiating event.

Wallerian degeneration occurs after axonal injury in both the peripheral nervous system (PNS) and central nervous system (CNS). It occurs in the section of the axon distal to the site of injury and usually begins within 24–36 hours of a lesion. Prior to degeneration, the distal section of the axon tends to remain electrically excitable. After injury, the axonal skeleton disintegrates, and the axonal membrane breaks apart. Axonal degeneration is followed by degradation of the myelin sheath and infiltration by macrophages. The macrophages, accompanied by Schwann cells, serve to clear the debris from the degeneration.

Schwann cells respond to loss of axons by extrusion of their myelin sheaths, downregulation of myelin genes, dedifferentiation and proliferation. They finally align in tubes (Büngner bands) and express surface molecules that guide regenerating fibers. Within 4 days of the injury, the distal end of the portion of the nerve fiber proximal to the lesion sends out sprouts towards those tubes and these sprouts are attracted by growth factors produced by Schwann cells in the tubes. If a sprout reaches the tube, it grows into it and advances about 1 mm per day, eventually reaching and reinnervating the target tissue. If the sprouts cannot reach the tube, for instance because the gap is too wide or scar tissue has formed, surgery can help to guide the sprouts into the tubes. Regeneration is efficient in the PNS, with near complete recovery in case of lesions that occur close to the distal nerve terminal. However recovery is hardly observed at all in the spinal cord. One crucial difference is that in the CNS, including the spinal cord, myelin sheaths are produced by oligodendrocytes and not by Schwann cells.