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Summary: Schwann cells respond to acute axon damage by transiently transdifferentiating into specialized repair cells that restore sensorimotor function. However, the molecular systems controlling repair cell formation and function are not well defined, and consequently, it is unclear whether this form of cellular plasticity has a role in peripheral neuropathies. Here, we identify Mitf as a transcriptional sensor of axon damage under the control of Nrg-ErbB-PI3K-PI5K-mTorc2 signaling. Mitf regulates a core transcriptional program for generating functional repair Schwann cells following injury and during peripheral neuropathies caused by CMT4J and CMT4D. In the absence of Mitf, core genes for epithelial-to-mesenchymal transition, metabolism, and dedifferentiation are misexpressed, and nerve repair is disrupted. Our findings demonstrate that Schwann cells monitor axonal health using a phosphoinositide signaling system that controls Mitf nuclear localization, which is critical for activating cellular plasticity and counteracting neural disease.