Members of the neuregulin-1 (Nrg1) growth factor family play important roles during Schwann cell development. Recently, it has been shown that the membrane-bound type III isoform is required for Schwann cell myelination. Interestingly, however, Nrg1 type II, a soluble isoform, inhibits the process. The mechanisms underlying these isoform-specific effects are unknown. It is possible that myelination requires juxtacrine Nrg1 signaling provided by the membrane-bound isoform, whereas paracrine stimulation by soluble Nrg1 inhibits the process. To investigate this, we asked whether Nrg1 type III provided in a paracrine manner would promote or inhibit myelination. We found that soluble Nrg1 type III enhanced myelination in Schwann cell-neuron cocultures. It improved myelination of Nrg1 type III+/−neurons and induced myelination on normally nonmyelinated sympathetic neurons. However, soluble Nrg1 type III failed to induce myelination on Nrg1 type III−/−neurons. To our surprise, low concentrations of Nrg1 type II also elicited a similar promyelinating effect. At high doses, however, both type II and III isoforms inhibited myelination and increased c-Jun expression in a manner dependent on Mek/Erk (mitogen-activated protein kinase kinase/extracellular signal-regulated kinase) activation. These results indicate that paracrine Nrg1 signaling provides concentration-dependent bifunctional effects on Schwann cell myelination. Furthermore, our studies suggest that there may be two distinct steps in Schwann cell myelination: an initial phase dependent on juxtacrine Nrg1 signaling and a later phase that can be promoted by paracrine stimulation.