The molecular mechanisms controlling the process of myelination by Schwann cells remain elusive, despite recent progress in the identification and characterization of genes encoding myelin components (reviewed in ref. 1). We have created a null allele in the mouse Krox-20 gene, which encodes a zinc-finger transcription factor, by in-frame insertion of the Escherichia coli lacZ gene, and have shown that hindbrain segmentation is affected in Krox-20-/- embryos. We demonstrate here that Krox-20 is also activated in Schwann cells before the onset of myelination and that its disruption blocks Schwann cells at an early stage in their differentiation, thus preventing myelination in the peripheral nervous system. In Krox-20-/- mice, Schwann cells wrap their cytoplasmic processes only one and a half turns around the axon, and although they express the early myelin marker, myelin-associated glycoprotein, late myelin gene products are absent, including those for protein zero and myelin basic protein. Therefore Krox-20 is likely to control a set of genes required for completion of myelination in the peripheral nervous system.