The neural crest gives rise to numerous cell types, dysfunction of which contributes to many disorders. Here, we report that adenosine deaminase acting on RNA (ADAR1), responsible for adenosine-to-inosine editing of RNA, is required for regulating the development of two neural crest derivatives: melanocytes and Schwann cells. Neural crest specific conditional deletion of Adar1 in mice leads to global depigmentation and absence of myelin from peripheral nerves, resulting from alterations in melanocyte survival and differentiation of Schwann cells, respectively. Upregulation of interferon stimulated genes precedes these defects, which are associated with the triggering of a signature resembling response to injury in peripheral nerves. Simultaneous extinction of MDA5, a key sensor of unedited RNA, rescues both melanocytes and myelin defects in vitro, suggesting that ADAR1 safeguards neural crest derivatives from aberrant MDA5-mediated interferon production. We thus extend the landscape of ADAR1 function to the fields of neural crest development and disease.