In peripheral nerves, Schwann cells (SCs) form contacts with axons, other SCs, and extracellular matrix components that are critical for their migration, differentiation, and response to injury. Here, we report that lysophosphatidic acid (LPA), an extracellular signaling phospholipid, regulates the morphology and adhesion of cultured SCs. Treatment with LPA induces f-actin rearrangements resulting in a "wreath"-like structure, with actin loops bundled peripherally by short orthogonal filaments. The latter appear to anchor the SC to a laminin substrate, because they colocalize with the focal adhesion proteins, paxillin and vinculin. SCs also respond to LPA treatment by forming extensive cell-cell junctions containing N-cadherin, resulting in cell clustering. Pharmacological blocking experiments indicate that LPA-induced actin rearrangements and focal adhesion assembly involve Rho pathway activation via a pertussis toxin-insensitive G-protein. The transcript encoding LPA1, the canonical G-protein-coupled receptor for LPA, is upregulated after sciatic nerve transection, and SCs cultured from Ip(A7)-null mice exhibit greatly diminished morphological responses to LPA. Cultured SCs can release an LPA-like factor implicating SCs as a potential source of endogenous, signaling LPA. These data, together with the previous demonstration of LPA-mediated SC survival, implicate endogenous receptor-mediated LPA signaling in the control of SC development and function.