Expression of Sox2, which encodes an HMG-box–type transcription factor, is down-regulated in the neural plate when neural crest segregates from dorsal neural tube and remains low during crest cell migration. Sox2 expression is subsequently up-regulated in some crest-derived cells in the developing peripheral nervous system and is later restricted to glial sublineages. Misexpression of Sox2 and mutant forms of Sox2 both in neural plate explants and in embryonic ectoderm reveals that Sox2 inhibits neural crest formation as a transcriptional activator. Similar manipulation of Sox2 function in migratory and postmigratory neural crest-derived cells indicates that Sox2 regulates proliferation and differentiation in developing peripheral nervous system. Developmental Dynamics 229:74–86, 2004. © 2003 Wiley-Liss, Inc.