Glial cells express acetylcholine receptors. In particular, rat Schwann cells express different muscarinic receptor subtypes, the most abundant of which is the M2 subtype. M2 receptor activation causes a reversible arrest of the cell cycle. This negative effect on Schwann cell proliferation suggests that these cells may possibly progress into a differentiating program. In this study we analyzed the in vitro modulation, by the M2 agonist arecaidine, of transcription factors and specific signaling pathways involved in Schwann cell differentiation. The arecaidine-induced M2 receptor activation significantly upregulates transcription factors involved in the promyelinating phase (e.g., Sox10 and Krox20) and downregulates proteins involved in the maintenance of the undifferentiated state (e.g., c-jun, Notch-1, and Jagged-1). Furthermore, arecaidine stimulation significantly increases the expression of myelin proteins, which is accompanied by evident changes in cell morphology, as indicated by electron microscopy analysis, and by substantial cellular re-distribution of actin and cell adhesion molecules. Moreover, ultrastructural and morphometric analyses on sciatic nerves of M2/M4 knockout mice show numerous degenerating axons and clear alterations in myelin organization compared with wild-type mice. Therefore, our data demonstrate that acetylcholine mediates axon-glia cross talk, favoring Schwann cell progression into a differentiated myelinating phenotype and contributing to compact myelin organization.