Partial denervation or paralysis with botulinum toxin, manipulations that induce sprouting of nerve terminals in muscle, also induced terminal Schwann cells to extend processes. These processes were associated with every nerve sprout and in some cases were longer than the sprouts that appeared to be growing along them. Following partial denervation, more than 70% of the nerve sprouts that grew to innervate nearby denervated endplates were associated with Schwann cell processes that had extended from the denervated endplates, ie, in the direction opposite to nerve growth. Implantation of Schwann cells into an innervated muscle induced sprouting upon contact of an axon or nerve terminal by Schwann cell processes. These observations show that Schwann cells induce and guide axonal sprouting in muscle.