Myelin-associated glycoprotein (MAG) is an integral membrane protein expressed by myelinating glial cells that occurs in two developmentally regulated forms with different carboxyterminal cytoplasmic domains (L-MAG and S-MAG). To investigate the role of MAG in myelination a recombinant retrovirus was used to introduce a MAG cDNA (L-MAG form) into primary Schwann cells in vitro. Stably infected populations of cells were obtained that constitutively expressed MAG at the cell surface without the normal requirement for neuronal contact to induce expression. Constitutive expression of L-MAG did not affect myelination. In long term co-culture with purified sensory neurons, the higher level of MAG expression on infected Schwann cells was reduced to control levels on cells that formed myelin. On the other hand, unlike normal Schwann cells, infected Schwann cells associated with nonmyelinated axons or undergoing Wallerian degeneration expressed high levels of MAG. This suggests that a posttranscriptional mechanism modulates MAG expression during myelination. Immunostaining myelinating cultures with an antibody specific to L-MAG showed that L-MAG was normally transiently expressed at the earliest stages of myelination. In short term co-culture with sensory neurons, infected Schwann cells expressing only L-MAG segregated and ensheathed larger axons after 4 d in culture provided that an exogenous basal lamina was supplied. Similar activity was rarely displayed by control Schwann cells correlating with the low level of MAG induction after 4 d. These data strongly suggest that L-MAG promotes the initial investment by Schwann cells of axons destined to be myelinated.