The extrasynaptic region of the squid giant nerve fiber exhibits neuron‐Schwann cell interactions that appear to involve glutamate as a mediator. In an earlier work, it was demonstrated that the periaxonal sheaths of such nerves (where the Schwann cells are located) possess the capacity to transport glutamate. However there was no information available about the possible fate of the glutamate incorporated into the sheaths. In this study, it is demonstrated that the periaxonal sheaths of the extrasynaptic region of squid giant nerves are capable of metabolizing glutamate. Sheaths incubated with 10 μM [1‐14C] glutamate produced [14C]O2 in a manner proportional to time and estimated cell water volume. At least 45% of this CO2 production was determined to be independent of transaminase catalyzed isotopic exchange, thus reflecting real degradation (decarboxylation) of glutamate. It was also demonstrated that the sheaths were capable of glutamine synthesis. Taken together, the findings of our laboratory indicate not only that the Schwann cells of the sheaths fulfil the requirements for a site for the uptake and metabolism of transmitter glutamate in the squid giant nerve but also that certain metabolic characteristics associated with the neuro‐glial unit around synapses are also found in non‐synaptic areas of nerve fibers. GLIA 23:298–303, 1998. © 1998 Wiley‐Liss, Inc.