Progesterone is shown here to be produced from pregnenolone by Schwann cells in peripheral nerves, After cryolesion of the sciatic nerve in male mice, axons regenerate and become myelinated. Blocking either the local synthesis or the receptor-mediated action of progesterone impaired remyelination. Administration of progesterone or its precursor, pregnenolone, to the lesion site increased the extent of myelin sheath formation. Myelination of axons was also increased when progesterone was added to cultures of rat dorsal root ganglia. These observations indicate a role for locally produced progesterone in myelination, demonstrate that progesterone is not simply a sex steroid, and suggest a new therapeutic approach to promote myelin repair.