This protocol describes methods of isolating skin-derived precursors (SKPs) from rodent and human skin, and for generating and enriching Schwann cells from rodent SKPs. SKPs are isolated as a population of non-adherent cells from the dermis that proliferate and self-renew as floating spheres in response to fibroblast growth factor 2 (FGF2) and epidermal growth factor (EGF). Their differentiation into Schwann cells and subsequent enrichment of these differentiated progeny involves culturing SKPs as adherent cells in the absence of FGF2 and EGF, but in the presence of neuregulins, and then mechanically isolating the Schwann cell colonies using cloning cylinders. Methods for expanding and characterizing these Schwann cells are provided. Generation of primary SKPs takes approximately 2 weeks, while differentiation of Schwann cells requires an additional 4–6 weeks.