Peripheral myelin formation is initiated by axonal cues that trigger a differentiation program in associated Schwann cells. Here, we define one essential differentiation signal: activation of the transcription factor NF-kappaB. In rat sciatic nerves, NF-kappaB was highly upregulated in pre-myelinating Schwann cells, and then its expression progressively declined until it was nearly absent in adults. Similarly, in co-cultures of Schwann cells and sensory neurons, NF-kappaB activation paralleled myelination, and blocking its activity or using cells from mice lacking the NF-kappaB subunit p65 markedly attenuated myelination. Inhibiting NF-kappaB also prevented activation of Oct-6, a transcription factor induced by axonal contact and required for proper myelin formation. These results show that the activation of NF-kappaB is an essential signal for the progression of axon-associated Schwann cells into a myelinating phenotype.