Schwann cells are thought to be abnormal in type 1 neurofibromatosis (NF1) and to contribute to the formation of benign and malignant tumors in this disease. To test the role of the NF1 gene product neurofibromin as a Ras-GTPase activating protein in Schwann cells, and to study the effect of the loss of neurofibromin on Schwann cell proliferation, we isolated Schwann cells from mice with targeted disruption of NF1. The properties of these neurofibromin deficient cells were strikingly similar to those of v-ras expressing rat Schwann cells with normal levels of neurofibromin. The similarities included: growth inhibition, noted as a decrease in cell division in response to glial growth factor 2 (GGF2) and of neuronal contact; morphological changes such as the appearance of elaborated processes; and elevated levels of Ras-GTP. Furthermore, Ras-GTP levels in the neurofibromin deficient Schwann cells were consistently elevated in response to GGF2 treatment. In contrast to these results, introduction of v-ras into a Schwannoma cell line (RN22) led to cell transformation. We conclude that neurofibromin functions as a major regulator of Ras-GTP in Schwann cells; however, mutation in NF1 by itself is unlikely to explain the hyperplasia observed in Schwann cell tumors in NF1 disease.