Boundary cap cells can generate neurons as well as peripheral glia during embryonic development (Maro, G.S., Vermeren, M., Voiculescu, O., Melton, L., Cohen, J., Charnay, P., Topilko, P., 2004. Neural crest boundary cap cells constitute a source of neuronal and glial cells of the PNS. Nat Neurosci. 7 (9), 930–938), and, recently, the boundary cap was shown to contain multipotent stem cells (Hjerling-Leffler, J., Marmigère, F., Heglind, M., Cederberg, A., Koltzenburg, M., Enerbäck, S., Ernfors, P., 2005. The boundary cap, a source of neural crest stem cells generating multiple sensory neuron subtypes. Development. 132 (11), 2623–2632). The ability of stem cells to generate mature functional glial phenotypes has not been addressed. In this study, we have explored the competence of boundary neural crest stem cells (bNCSCs) to differentiate into mature functional Schwann cells (SCs) in vitro and in vivo. bNCSCs failed to differentiate into SCs in vitro when cultured in a defined media and in vivo when grafted into adult rat sciatic nerves. However, in the presence of neuregulins, during long-term cultures, the majority of bNCSCs differentiated into SCs. After analysis of the in vivo expression of Sox2, Sox10, S100, GFAP, fibronectin and Krox20 in the glial lineages, we used these markers to characterize differentiation of the bNCSCs. Gliogenesis of bNCSCs proceeded similar to that in vivo by sequentially adopting a SC precursor and immature Schwann cell before maturing into myelinating and non-myelinating SCs. In co-culture with explanted dorsal root ganglia (DRG) as well as in vivo in transplants to the axotomized sciatic nerve, these bNCSC-derived SCs myelinated axons as shown by ensheathing of neuronal processes and expression of myelin basic proteins (MBP). These results show that, under appropriate conditions, bNCSCs can generate mature SCs that are functional and can myelinate axons in regenerating nerves.