Schwann cell proliferation and subsequent differentiation to nonmyelinating and myelinating cells are closely linked processes. Elucidating the molecular mechanisms that control these events is key to the understanding of nerve development, regeneration, nerve-sheath tumors, and neuropathies. We define the protooncogene Ski, an inhibitor of TGF-beta signaling, as an essential component of the machinery that controls Schwann cell proliferation and myelination. Functional Ski overexpression inhibits TGF-beta-mediated proliferation and prevents growth-arrested Schwann cells from reentering the cell cycle. Consistent with these findings, myelinating Schwann cells upregulate Ski during development and remyelination after injury. Myelination is blocked in myelin-competent cultures derived from Ski-deficient animals, and genes encoding myelin components are downregulated in Ski-deficient nerves. Conversely, overexpression of Ski in Schwann cells causes an upregulation of myelin-related genes. The myelination-regulating transcription factor Oct6 is involved in a complex modulatory relationship with Ski. We conclude that Ski is a crucial signal in Schwann cell development and myelination.