Efficient neuronal conductance requires that axons are insulated by glial cells. For this, glial membranes need to wrap around axons. Invertebrates show a relatively simple extension of glial membranes around the axons, resembling Remak fibers formed by Schwann cells in the mammalian peripheral nervous system. To unravel the molecular pathways underlying differentiation of glial cells that provide axonal wrapping, we are using the genetically amenable Drosophila model. At the end of larval life, the wrapping glia differentiates into very large cells, spanning more than 1 mm of axonal length. The extension around axonal membranes is not influenced by the caliber of the axon or its modality. Using cell type-specific gene knockdown we show that the extension of glial membranes around the axons is regulated by an autocrine activation of the EGF receptor through the neuregulin homolog Vein. This resembles the molecular mechanism employed during cell-autonomous reactivation of glial differentiation after injury in mammals. We further demonstrate that Vein, produced by the wrapping glia, also regulates the formation of septate junctions in the abutting subperineurial glia. Moreover, the wrapping glia indirectly controls the proliferation of the perineurial glia. Thus, the wrapping glia appears center stage to orchestrate the development of the different glial cell layers in a peripheral nerve.