Conditioned medium from cultured peritoneal macrophages that have phagocytosed a myelin membrane fraction is mitogenic for cultured Schwann cells. Production of the mitogenic supernatant was time- and dose-dependent with a maximal Schwann cell-proliferative response from supernatants after 48-hr incubation of cultured macrophages with myelin-enriched fraction (200 micrograms of protein per ml). The response was specific for myelin membrane: supernatants derived from macrophages incubated with axolemma, liver microsomes, polystyrene beads, or lipopolysaccharide were not mitogenic. Lysosomal processing of the myelin membrane was necessary for the production of the mitogenic factor, which was shown to be heat labile and trypsin sensitive. There was no species specificity because myelin membranes isolated from the central and peripheral nervous systems of rat, bovine, and human were equally potent in eliciting mitogenic supernatant. However, supernatants derived from central nervous system myelin membranes were two to three times more mitogenic than those obtained from peripheral nervous system fractions of the same species. Previous observations that myelin is mitogenic for cultured Schwann cells may, in part, involve the intermediate processing of myelin by macrophages that are present in Schwann cell cultures. These results suggest that macrophages play a crucial role in Schwann cell proliferation during Wallerian degeneration.