An implantable neural interface capable of reliable long-term high-resolution recording from peripheral nerves has yet to be developed. Device design is challenging because extracellular axonal signals are very small, decay rapidly with distance from the axon, and in myelinated fibres are concentrated close to nodes of Ranvier, which are around 1 mum long and spaced several hundred micrometers apart. We present a finite element model examining the electrical behavior of axons in microchannels, and demonstrate that confining axons in such channels substantially amplifies the extracellular signal. For example, housing a 10-microm myelinated axon in a 1-cm-long channel with a 1000-microm(2) cross section is predicted to generate a peak extracellular voltage of over 10 mV. Furthermore, there is little radial signal decay within the channel, and a smooth axial variation of signal amplitude along the channel, irrespective of node location. Additional benefits include a greater extracellular voltage generated by large myelinated fibres compared to small unmyelinated axons, and the reduction of gain to unity at the end of the channel which ensures that there can be no crosstalk with electrodes in other channels nearby. A microchannel architecture seems well suited to the requirements of a peripheral nerve interface.