The expression of myelin-associated glycoprotein (MAG) in purified rat Schwann cells following coculture with dorsal root ganglion neurons was compared with the expression of galactocerebroside (GalC) and Po using immunocytochemistry. In defined serum-free medium, lacking ascorbic acid, in which Schwann cells proliferate but neither ensheathe nor myelinate axons, axonal interaction up-regulated the cell surface expression of MAG and GalC but not of Po. Excision of neuronal cell bodies resulted in a down-regulation of both MAG and GalC from the Schwann cell surface. When cocultures were switched to complete medium (serum plus ascorbic acid) to promote myelination, Schwann cells committed to form myelin continued to express high levels of MAG and GalC on their surface, but nonmyelinating Schwann cells down-regulated MAG and GalC. There was significant MAG immunoreactivity associated with the external aspect of the apparent nodal region of developing myelin sheaths. Permeabilization prior to immunostaining revealed that all of the Schwann cell cytoplasmic processes of nascent internodes were significantly stained with anti-MAG antibodies before the appearance of Po immunoreactivity. The amount of MAG on the surface of mature myelin segments was reduced compared with developing myelin segments, but there was a considerable amount of anti-MAG staining in the paranodes and Schmidt-Lanterman incisures. The time of expression and localization of MAG indicates that it may be a critical molecule in the process by which the Schwann cell engulfs an axon destined to be myelinated and establishes the extent of the future internode.