Skin melanocytes arise from two sources: either directly from neural crest 
progenitors or indirectly from neural crest-derived Schwann cell precursors 
after colonization of peripheral nerves. The relationship between these two 
melanocyte populations and the factors controlling their specification remains 
poorly understood. Direct lineage tracing reveals that neural crest and Schwann 
cell progenitor-derived melanocytes are differentially restricted to the epaxial 
and hypaxial body domains, respectively. Furthermore, although both populations 
are initially part of the Foxd3 lineage, hypaxial melanocytes lose Foxd3 at late 
stages upon separation from the nerve, whereas we recently found that epaxial 
melanocytes segregate earlier from Foxd3-positive neural progenitors while still 
residing in the dorsal neural tube. Gain- and loss-of-function experiments in 
avians and mice, respectively, reveal that Foxd3 is both sufficient and 
necessary for regulating the balance between melanocyte and Schwann cell 
development. In addition, Foxd3 is also sufficient to regulate the switch 
between neuronal and glial fates in sensory ganglia. Together, we propose that 
differential fate acquisition of neural crest-derived cells depends on their 
progressive segregation from the Foxd3-positive lineage.