Transgenic mice were generated with a fusion gene carrying a portion of the murine myelin proteolipid protein (PLP) gene, including the first intron, fused to the E. coli LacZ gene. Three transgenic lines were derived and all lines expressed the transgene in central nervous system white matter as measured by a histochemical assay for the detection of beta-galactosidase activity. PLP-LacZ transgene expression was regulated in both a spatial and temporal manner, consistent with endogenous PLP expression. Moreover, the transgene was expressed specifically in oligodendrocytes from primary mixed glial cultures prepared from transgenic mouse brains and appeared to be developmentally regulated in vitro as well. Transgene expression occurred in embryos, presumably in pre- or nonmyelinating cells, rather extensively throughout the peripheral nervous system and within very discrete regions of the central nervous system. Surprisingly, beta-galactosidase activity was localized predominantly in the myelin in these transgenic animals, suggesting that the NH2-terminal 13 amino acids of PLP, which were present in the PLP-LacZ gene product, were sufficient to target the protein to the myelin membrane. Thus, the first half of the PLP gene contains sequences sufficient to direct both spatial and temporal gene regulation and to encode amino acids important in targeting the protein to the myelin membrane.