We have characterized a cell, the Schwann cell precursor, that represents a distinct intermediate differentiation stage in the process by which Schwann cells are generated from neural crest cells. The Schwann cell precursor shows radical differences from Schwann cells which include death regulation, antigenic phenotype, pattern of cell-cell interaction, migratory behavior, and morphology. In the nerves of the rat hind limb, Schwann cells are irreversibly generated from these during a brief period, essentially embryonic days 15-17. We also provide evidence that the survival of Schwann cell precursors is regulated by neurons and identify basic fibroblast growth factor as a potential key regulator of apoptosis in Schwann cell precursors and of precursor to Schwann cell conversion. These findings have implications for our understanding of gliogenesis in the peripheral nervous system.