A prerequisite to myelination of peripheral axons by Schwann cells (SCs) is SC differentiation, and recent evidence indicates that reprogramming from a glycolytic to oxidative metabolism occurs during cellular differentiation. Whether this reprogramming is essential for SC differentiation, and the genes that regulate this critical metabolic transition are unknown. Here we show that the tumour suppressor Lkb1 is essential for this metabolic transition and myelination of peripheral axons. Hypomyelination in the Lkb1-mutant nerves and muscle atrophy lead to hindlimb dysfunction and peripheral neuropathy. Lkb1-null SCs failed to optimally activate mitochondrial oxidative metabolism during differentiation. This deficit was caused by Lkb1-regulated diminished production of the mitochondrial Krebs cycle substrate citrate, a precursor to cellular lipids. Consequently, myelin lipids were reduced in Lkb1-mutant mice. Restoring citrate partially rescued Lkb1-mutant SC defects. Thus, Lkb1-mediated metabolic shift during SC differentiation increases mitochondrial metabolism and lipogenesis, necessary for normal myelination.