We have isolated a 1.8 kb cDNA (pCD25) clone that encodes a transcript that is differentially expressed during nerve regeneration. Nucleotide sequence comparison indicates 89.6% homology with the recently identified murine 'growth arrest-specific' gene gas3. The open reading frame of the CD25 transcript predicts a 17 kDa protein with four putative transmembrane regions. Steady-state levels of the CD25 mRNA are very much higher in sciatic nerve than in other tissues, and expression in sciatic nerve is confined to Schwann cells. Following nerve injury, the transcript levels rapidly declined in nerve segments distal to the site of lesion, but recovered upon nerve regeneration. In contrast, in distal stumps of permanently transected nerves, the mRNA level remained very low. Substantial amounts of the mRNA could be reinduced only upon anastomosis of these interrupted nerve stumps. Re-induction of the mRNA followed the elongation of regenerating axons through the distal nerve segment. Our data indicate that axons regulate expression of the CD25 mRNA in Schwann cells, and suggest that the CD25 protein functions during Schwann cell growth and differentiation.