To isolate new zinc finger genes expressed at early stages of peripheral nerve development, we have used PCR to amplify conserved zinc finger sequences. RNA from rat embryonic day 12 and 13 sciatic nerves, a stage when nerves contain Schwann cell precursors, was used to identify several genes not previously described in Schwann cells. One of them, zinc finger protein (ZFP)-57, proved to be the homologue of a mouse gene found in F9 teratocarcinoma cells. Its mRNA expression profile within embryonic and adult normal and transected peripheral nerves, and its distribution in the rest of the nervous system is described. High levels of expression are seen in embryonic nerves and spinal cord. These drop rapidly during the first few weeks after birth, a pattern mirrored in other parts of the nervous system. ZFP-57 localizes to the nucleus of Schwann and other cells. The sequence contains an N-terminal Krüppel-associated box (KRAB) domain and ZFP-57 constructs containing green fluorescent protein reveal that the protein colocalizes with heterochromatin protein 1alpha to centromeric heterochromatin in a characteristic speckled pattern in NIH3T3 cells. The KRAB domain is required for this localization, because constructs lacking it target the protein to the nucleus but not to the centromeric heterochromatin. When fused to a heterologous DNA binding domain, the KRAB domain of ZFP-57 represses transcription, and full-length ZFP-57 represses Schwann cell transcription from myelin basic protein and P(0) promoters in co-transfection assays. Zfp-57 mRNA is up-regulated in Schwann cells in response to leukemia inhibitory factor and fibroblast growth factor 2.