We have prepared transgenic mice carrying a temperature-sensitive mutant of the SV40 oncogene (tsA-1609) under the control of 5′ flanking sequences from the Schwann cell-specific P0 gene. Four of six founder mice showed moderate to severe hypomyelination in peripheral nerves of tail biopsies, with only rare myelinated fibers. Offspring were obtained from three of these founders. Northern blot and immunohistochemical analyses showed that expression of T-antigen was restricted to the PNS. Mice expressing the highest levels of T-antigen exhibited the most severe hypomyelination. Mice expressing lower levels developed transient mild hypomyelination, but after long latencies developed sporadic schwannomas. An immortalized cell line exhibiting properties of Schwann cells at an arrested stage of differentiation, termed “SCT-1,” was derived from one of these tumors.