The histological localization of the extracellular matrix glycoprotein tenascin was studied during the formation of peripheral nerves in the developing chick hindlimb (embryonic stages 21.5 to 30) by light and electron microscopic immunological methods to obtain insights into the molecule's functional role in the pathway formation by motor and sensory nerves. At stages 21.5 and 23, nerve roots and plexus were surrounded by high tenascin-immunoreactivity, whereas the not yet innervated limb bud was not immunoreactive. During innervation of the limb bud at stages 24.5 and 25, tenascin was detectable at the limb bud base and restricted in its expression to the proximal nerve regions. The nerve tips did not contact areas of elevated tenascin-immunoreactivity. At stages 26 to 28 the dorsal and ventral trunks of the crural and sciatic nerves were surrounded by tenascin-immunoreactivity, which was localized between Schwann and mesenchymal cells. The tips of the growing nerve had now reached the tenascin-positive interface between bone and muscle anlagen. This interface was contacted tangentially rather than penetrated by the nerve tips. The medial and lateral femoral cutaneous nerves were surrounded by high and weak tenascin-immunoreactivity, respectively. In both nerves, tenascin-immunoreactivity was absent where the nerves branched extensively to innervate the skin. The cutaneous nerves diverging from the sciatic nerve were of very low tenascin-immunoreactivity or tenascin-negative at all developmental stages tested. At stages 29 and 30, muscle nerves, having just entered the tenascin-negative muscles, exhibited strong immunoreactivity, whereas the more proximally situated trunks of the sciatic nerve were weakly and discontinuously labeled, particularly at sites where smaller nerves were branching off. Since the cutaneous branches of the sciatic nerve were always of low tenascin-immunoreactivity, the question was raised whether tenascin expression in the sciatic nerve depended on the presence of motor axons. Spinal cords of stage 19 or 20 embryos were therefore removed and tenascin expression was investigated at stages 26 and 27. Some of the residual nerves were weakly tenascin-immunoreactive, whereas others were tenascin-negative. Our observations suggest that tenascin is not involved in the initial guidance of peripheral nerves to their targets. Rather, neuron-induced tenascin appears to stabilize the proximal nerve trunks during a transient time period, possibly by preventing axons and Schwann cells from intermingling with the surrounding mesenchyme, thus contributing to nerve fiber compaction. Conversely, nerve branching may be elicited by reduced levels of tenascin. Furthermore, tenascin may divert growth cones from the developing bone tissue and direct muscle afferents to their appropriate targets.