Exposure of weanling rats to a diet containing 1% elemental tellurium causes segmental demyelination of peripheral nerve, and an inhibition of squalene epoxidase. This inhibition is thought to be the mechanism of action leading to demyelination. Tellurite appears to be the active inhibitory species in a cell-free system but the active species in vivo is unknown. We examined potassium tellurite (K2TeO3) and three organotellurium compounds for their ability to inhibit squalene epoxidase in Schwann cell cultures and to induce demyelination in weanling rats. K2TeO3 had no effect on squalene epoxidase activity in cultured Schwann cells and caused no demyelination in vivo. All three organotellurium compounds caused inhibition of squalene epoxidase in vitro and caused demyelination in vivo. (CH3)2TeCl2 was the most potent of these compounds and its neuropathy most resembled that caused by elemental tellurium. These data are consistent with the hypothesis that tellurium-induced demyelination is a result of squalene epoxidase inhibition and suggest that a dimethyltelluronium compound may be the neurotoxic species presented to Schwann cells in vivo.