During development of the peripheral nervous system, the extracellular matrix molecule tenascin has been found to be closely associated with growing axons. However, its origin and function in peripheral nerve formation are far from clear. In this study, we examined the expression of tenascin during outgrowth of sensory, motor and sympathetic preganglionic axons, and assessed its origin and function in peripheral nerve formation. During outgrowth of sensory and motor axons, a high concentration of tenascin and its mRNA was found to surround sensory and motor axons in the newly formed spinal nerves. The source of this tenascin was examined through a series of surgical manipulations. Neural crest removals did not alter the distribution of tenascin protein or its mRNA surrounding the spinal nerves. Transplantation of quail somites into chick embryos showed that, similar to the distribution of tenascin, there is a high concentration of somitic cells surrounding the spinal nerves. Moreover, somite removals resulted in a reduction of the tenascin and tenascin mRNA surrounding the spinal nerves. Taken together, these results suggest that the majority of the tenascin surrounding the spinal nerves is of somitic origin. Possible functions of tenascin associated with peripheral nerve formation were examined through injections of tenascin or its antiserum into individual somites prior to or during axon outgrowth. Injections of tenascin or its antiserum did not alter the trajectory of peripheral axons in the anterior half of the somite, nor produce gross abnormalities in the morphology of peripheral nerves, suggesting that tenascin does not play a crucial role in the early formation of peripheral nerves.