Recent neuroimaging and postmortem studies have reported abnormalities in white matter of schizophrenic brains, suggesting the involvement of oligodendrocytes in the etiopathology of schizophrenia. This view is being supported by gene microarray studies showing the downregulation of genes related to oligodendrocyte function and myelination in schizophrenic brain compared to control subjects. However, there is currently little information available on the response of oligodendrocytes to antipsychotic drugs (APDs), which could be invaluable for corroborating the oligodendrocyte hypothesis. In this study we found: (1) quetiapine (QUE, an atypical APD) treatment in conjunction with addition of growth factors increased the proliferation of neural progenitors isolated from the cerebral cortex of embryonic rats; (2) QUE directed the differentiation of neural progenitors to oligodendrocyte lineage through extracellular signal-related kinases; (3) addition of QUE increased the synthesis of myelin basic protein and facilitated myelination in rat embryonic cortical aggregate cultures; (4) chronic administration of QUE to C57BL/6 mice prevented cortical demyelination and concomitant spatial working memory impairment induced by cuprizone, a neurotoxin. These findings suggest a new neural mechanism of antipsychotic action of QUE, and help to establish a role for oligodendrocytes in the etiopathology and treatment of schizophrenia.