Schwann cells develop from the neural crest in a well-defined sequence of events. This involves the formation of the Schwann cell precursor and immature Schwann cells, followed by the generation of the myelin and nonmyelin (Remak) cells of mature nerves. This review describes the signals that control the embryonic phase of this process and the organogenesis of peripheral nerves. We also discuss the phenotypic plasticity retained by mature Schwann cells, and explain why this unusual feature is central to the striking regenerative potential of the peripheral nervous system (PNS).