POU proteins have been shown to transcriptionally active cell-specific genes and to participate in the determination of cell fate. It is therefore thought that these proteins function in development through the stable activation of genes that define specific developmental pathways. Evidence is provided here for an alternative mode of action. The primary structure of SCIP, a POU protein expressed by developing Schwann cells of the peripheral nervous system, was deduced and SCIP activity was studied. Both in normal development and in response to nerve transection, SCIP expression was transiently activated only during the period of rapid cell division that separates the premyelinating and myelinating phases of Schwann cell differentiation. In cotransfection assays, SCIP acted as a transcriptional repressor of myelin-specific genes.