This study was undertaken to examine the bioactivity, specificity and reversibility of lithium’s action on the growth, survival, proliferation and differentiation of cultured Schwann cells (SCs). In isolated SCs, lithium promoted a state of cell cycle arrest that featured extensive cell enlargement and c-Jun downregulation in the absence of increased expression of myelin-associated markers. In addition, lithium effectively prevented mitogen-induced S-phase entry without impairing cell viability. When lithium was administered together with differentiating concentrations of cAMP analogs, a dramatic inhibition of the expression of the master regulator of myelination Krox-20 was observed. Likewise, lithium antagonized the cAMP-dependent expression of various myelin markers such as protein zero, periaxin and galactocerebroside and allowed SCs to maintain high levels of expression of immature SC markers even in the presence of high levels of cAMP and low levels of c-Jun. Most importantly, the inhibitory action of lithium on SC proliferation and differentiation was shown to be dose dependent, specific and reversible upon removal of lithium compounds. In SC-neuron cultures, lithium suppressed myelin sheath formation while preserving axonal integrity, SC-axon contact and basal lamina formation. Lithium was unique in its ability to prevent the onset of myelination without promoting myelin degradation or SC dedifferentiation. To conclude, our results underscored an unexpected antagonistic action of lithium on SC mitogenesis and myelin gene expression. We suggest that lithium represents an attractive pharmacological agent to safely and reversibly suppress the onset of SC proliferation, differentiation and myelination while maintaining the integrity of pre-existing myelinated fibers.