Brain-derived neurotrophic factor (BDNF) was shown to play a role in Schwann cell myelination by recruiting Par3 to the axon-glial interface, but the underlying mechanism has remained unclear. Here we report that Par3 regulates Rac1 activation by BDNF but not by NRG1-Type III in Schwann cells, although both ligands activate Rac1 in vivo. During development, active Rac1 signaling is localized to the axon-glial interface in Schwann cells by a Par3-dependent polarization mechanism. Knockdown of p75 and Par3 individually inhibits Rac1 activation, whereas constitutive activation of Rac1 disturbs the polarized activation of Rac1 in vivo. Polarized Rac1 activation is necessary for myelination as Par3 knockdown attenuates myelination in mouse sciatic nerves as well as in zebrafish. Specifically, Par3 knockdown in zebrafish disrupts proper alignment between the axon and Schwann cells without perturbing Schwann cell migration, suggesting that localized Rac1 activation at the axon-glial interface helps identify the initial wrapping sites. We therefore conclude that polarization of Rac1 activation is critical for myelination.