Summary Defining growth factor requirements for progenitors facilitates their characterization and amplification. We characterize a peripheral nervous system embryonic dorsal root ganglion progenitor population using in vitro clonal sphere-formation assays. Cells differentiate into glial cells, smooth muscle/fibroblast (SM/Fb)-like cells, and neurons. Genetic and pharmacologic tools revealed that sphere formation requires signaling from the EGFR tyrosine kinase. Nf1 loss of function amplifies this progenitor pool, which becomes hypersensitive to growth factors and confers tumorigenesis. DhhCre;Nf1 fl/fl mouse neurofibromas contain a progenitor population with similar growth requirements, potential, and marker expression. In humans, NF1 mutation predisposes to benign neurofibromas, incurable peripheral nerve tumors. Prospective identification of human EGFR +;P75 + neurofibroma cells enriched EGF-dependent sphere-forming cells. Neurofibroma spheres contain glial-like progenitors that differentiate into neurons and SM/Fb-like cells in vitro and form benign neurofibroma-like lesions in nude mice. We suggest that expansion of an EGFR-expressing early glial progenitor contributes to neurofibroma formation.