In complex organisms the nervous system comprises two cell types: neurons and glial cells. Their correct interplay is of crucial importance during both the development of the nervous system and for later function of the nervous system. In recent years tools have been developed for Drosophila that enable genetic approaches to understanding glial development and differentiation. Focusing on peripheral glial cells we first summarize wild-type development, then introduce some of the relevant genes that have been identified. Despite obvious differences between Drosophila and mammalian glial cells, the molecular machinery that controls terminal differentiation appears well conserved.