ABSTRACT To identify cell type(s) that might contribute to nerve sheath tumors (neurofibromas) in patients with neurofibromatosis type 1, we generated cell cultures containing neurons, Schwann cells and fibroblasts from transgenic mouse embryos in which the type 1 neurofibromatosis gene was disrupted by homologous recombination (Brannan et al. (1994)Genes Development, 8,1019-1029). Normal fascicle formation by perineurial cells failed to occur in the absence of neurofibromin. Fascicles were reduced in number and showed abnormal morphology when normal neurons and Schwann cells were cultured up to 37 days with fibroblasts lacking neurofibromin. Proliferation was increased in a majority of fibroblast cell strains analyzed from embryos lacking neurofibromin. These observations suggest that mutations in the neurofibromatosis type 1 gene affect fibroblast behavior that might contribute to neurofibroma formation in patients with neurofibromatosis type 1.