Axon-Schwann cell interactions are critical for myelin formation during peripheral nerve development and regeneration. Axonal contact promotes Schwann cell precursors to differentiate into a myelinating phenotype, and cAMP-elevating agents can mimic this; however, the mechanisms underlying this differentiation are poorly understood. We demonstrated previously that the transcription factor nuclear factor-kappaB (NF-kappaB) is required for myelin formation by Schwann cells (Nickols et al., 2003), although how it is activated during this process remained to be determined. Here, we report that culturing Schwann cells with sensory neurons results in the activation of cAMP-dependent protein kinase (PKA), and this kinase phosphorylates the p65 subunit of NF-kappaB at S276. The phosphorylation was also induced in cultured Schwann cells by treatment with forskolin, dibutyryl-cAMP, or by overexpression of a catalytic subunit of PKA, and this increased the transcriptional activity of NF-kappaB. In developing perinatal rat sciatic nerve, the kinetics of p65 phosphorylation at S276 paralleled that of PKA and NF-kappaB activation. To elucidate the role of p65 phosphorylation in myelin formation, we overexpressed an S276A mutant of p65 in cultured Schwann cells, which blocked PKA-mediated transcriptional activation of NF-kappaB. When the Schwann cells expressing the mutant were cocultured with sensory neurons, there was a 45% reduction in the number of myelinated fibers relative to controls, demonstrating a requirement for p65 phosphorylation by PKA during myelin formation.