The transcription factor SCIP is expressed by immature neurons and Schwann cells of the developing central and peripheral nervous systems, but this expression is largely extinguished when these cells fully differentiate. In immature Schwann cells in vitro, SCIP acts as a repressor of the myelin-specific genes that mark full differentiation. We have generated transgenic mice that express a dominant-negative antagonist of SCIP, specifically targeted to developing Schwann cells. This antagonist--designated delta SCIP--is transcriptionally inactive, but retains full DNA-binding activity. Mice that express delta SCIP exhibit a debilitating peripheral neuropathy that results from developmentally advanced Schwann cell differentiation, over-expression of myelin-specific gene products, and hypermyelination. These results suggest that SCIP functions as a transcriptional sensor of differentiation cues and thereby regulates the time and place at which Schwann cells differentiate.