Development of the peripheral nervous system requires radial axonal sorting by Schwann cells (SCs). To accomplish sorting, SCs must both proliferate and undergo morphogenetic changes such as process extension. Signaling studies reveal pathways that control either proliferation or morphogenesis, and laminin is essential for SC proliferation. However, it is not clear whether laminin is also required for SC morphogenesis. By using a novel time-lapse live-cell-imaging technique, we demonstrated that laminins are required for SCs to form a bipolar shape as well as for process extension. These morphological deficits are accompanied by alterations in signaling pathways. Phosphorylation of Schwannomin at serine 518 and activation of Rho GTPase Cdc42 and Rac1 were all significantly decreased in SCs lacking laminins. Inhibiting Rac1 and/or Cdc42 activities in cultured SCs attenuated laminin-induced myelination, whereas forced activation of Rac1 and/or Cdc42 in vivo improved sorting and hypomyelinating phenotypes in SCs lacking laminins. These findings indicate that laminins play a pivotal role in regulating SC cytoskeletal signaling. Coupled with previous results demonstrating that laminin is critical for SC proliferation, this work identifies laminin signaling as a central regulator coordinating the processes of proliferation and morphogenesis in radial axonal sorting.