The presence of neuronal-like, voltage-gated ion channels on glia has raised questions concerning their physiological roles. Insights into glial channel function can be gained by examining regulation of channel expression during axoglial interactions. We examine the regulation of Schwann cell potassium channels in developing sciatic nerves of newborn rats when myelin is first laid down. During the initial postnatal week, cell-attached patch-clamp recordings at soma of Schwann cells with visible myelin revealed an inward rectifying potassium channel (KIR), to date described only in CNS glia but not Schwann cells, as well as an outward potassium channel (KO). Around the resting potential, the KO channel is virtually closed, while the KIR channel appears maximally open. Compared with the KO channel, the KIR channel is blocked by low concentrations of Cs+ and exhibits higher sensitivity to 4- aminopyridine (4AP). Further, the KIR channel appears similar to other mammalian inward rectifiers and rectification depends, in part, on cytoplasmic Mg2+. Channel regulation bears an interesting relation to early myelination: as the average number of myelin lamellae increases from 6 to 21 from day 2 to day 8, currents decrease by 80–90%. The reduction in KO current also parallels the known decrease in proliferation of Schwann cells as they are being committed to myelination, supporting the recently proposed notion of a functional link between potassium channels and proliferation. The KIR channels, by virtue of being open at the resting potential, may play a role in buffering activity-dependent K+ accumulation during early myelin formation. The subsequent reduction in somal channel density may parallel a diminished need for K+ buffering as electrogenesis is restricted to nodal regions.