The role of Schwann cells (SC) during Wallerian degeneration has been controversial. The consensus opinion is that monocytes/macrophages are mainly responsible for myelin removal although SC were shown to phagocytose myelin in vitro and in vivo. In the present study, we correlate proto-oncogene expression with phenotypic changes in SC during Wallerian degeneration using immunohistochemistry and electron microscopy. The proliferative cells are labeled with proliferative cell nuclear antigen (PCNA), and macrophages are labeled with ED1 macrophage marker. We demonstrate c-fos expression in SC at the onset of axon disintegration 12 hours post-axotomy followed by expression of ED1, basic fibroblast growth factor (bFGF) and PCNA after 1 day. The myelin sheath fragments at the nodal region and forms ellipsoids. Schwann cells move to internodes and undergo nuclear and cytoplasmic hypertrophy; they phagocytose myelin ellipsoids with thick vimentin-rich processes and undergo mitosis. Resident macrophages express c-fos and phagocytose myelin debris sequestered into endoneurium by SC after 3 days, but they do not enter the tube until the fifth day. We believe that SC are induced by signals from injured axons to express c-fos which activates downstream genes that lead to the acquisition of phagocytic and proliferative activities. Myelin debris processed by SC may act as an inducer and a chemoattractant for resident macrophages. Cytokines produced by macrophages may stimulate SC proliferation and production of neurotrophic factors.