1. Some progesterone is synthesized within both the central and the peripheral nervous systems, where it regulates neurotransmission and important glial functions, such as the formation of myelin. Progesterone can thus be designated a "neurosteroid." 2. Steroids act not only on the brain, but also on peripheral nerves, which offer many advantages to study the biological significance of locally produced neurosteroids: their remarkable plasticity and regenerative capacity and their relatively simple structure. 3. By using the regenerating mouse sciatic nerve as a model, we have shown that progesterone synthesized by rat Schwann cells promotes the formation of new myelin sheaths. Progesterone also increases the number of myelinated axons when added at a low concentration to cocultures of Schwann cells and sensory neurons. 4. These findings show a function on myelination for locally produced progesterone and suggest a new pharmacological approach of myelin repair.