Oligodendrocytes are responsible for the formation of myelin sheaths surrounding axons. They are not confined to the white matter and within grey matter they are often closely associated with nerve cells. They have relatively small amounts of cytoplasm around the nucleus but have several processes which wrap themselves around axons to form an insulating sheath composed of a variable number of layers of cell membrane, through which very little current leeks. Nodes of Ranvier are composed of gaps between myelin sheets formed by different oligodendrocytes and at these points almost all of the sodium channels responsible for nerve conduction exist. A single oligodendrocyte can myelinate several axons (usually 10 - 15). The formation of a myelin sheath is the result of a process from an oligodendrocyte spiralling around an axon so that the cytoplasm is extruded until the opposite membranes meet, thus forming a multi-layered lipoprotein coat with a node of Ranvier at each end. An internode is the section between two nodes of Ranvier.

The thickness of the myelin sheath is related to the diameter of the axon, as is the internodal length. Axons conduct electrical signals away from the cell body and these signals are produced by the movement of ions across the cell membrane. A nerve impulse travels along an axon by jumping from one node of Ranvier to the next, a process known as saltatory conduction. The presence of a myelin sheath therefore both speeds up the conduction process and reduces the amount of energy used. The faster conducting axons have the thickest myelin sheath and the longest internodes. Not all axons are covered with myelin. The speed that a nerve impulse travels along an axon is also proportional to the internodal length and since this is proportional to the diameter of an axon, the larger the diameter of the latter the faster the speed of conduction.