P0 glycoprotein, the most abundant protein in peripheral nerve, is expressed specifically in the Schwann cell lineage. Upstream of the rat P0 gene 1.1 kb of DNA can activate expression of cDNAs specifically in Schwann cells in transgenic mice. However, the expression of P0 promoter-based transgenes has been inconsistent. As much as 9 kb of 5' flanking sequence fused to lacZ never yielded detectable levels of beta-galactosidase in multiple lines of mice. We describe transgenic mice that express lacZ in peripheral nerve, using the complete mouse P0 gene, including 6 kb of 5' flanking sequence, all exons and introns, and the natural polyadenylation signal. This vector activated lacZ expression specifically in cultured Schwann cells, and myelin-forming Schwann cells in four out of six transgenic lines. Transgene expression paralleled that of the endogenous P0 gene, both during development and after Wallerian degeneration. lacZ expression was lower than endogenous P0 expression, and was not detected in neural crest or Schwann cell precursors, where low levels of P0 mRNA are present. However, when the same vector contained a small myc tag instead of the 3.2-kb lacZ insert, the resulting transgenic mRNA was expressed at levels comparable to endogenous P0 mRNA. These data suggest that intragenic or 3' flanking sequences are necessary to generate the remarkable levels of endogenous P0 gene expression.