During peripheral nervous system development, Schwann cells undergo Rac1-dependent cytoskeletal reorganization as they insert cytoplasmic extensions into axon bundles to radially sort, ensheath, and myelinate individual axons. However, our understanding of the direct effectors targeted by Rac1 is limited. Here, we demonstrate that striatin-3 and MOB4 are novel Rac1 interactors. We show that, similar to Rac1-null Schwann cells, Schwann cell specific ablation of striatin-3 causes defects in lamellipodia formation. In addition, conditional Schwann cell knockout of multiple striatin proteins presents a severe delay in radial sorting. Finally, we demonstrate here that deletion of Rac1 or striatin-1/3 in Schwann cells causes defects in Hippo pathway regulation, phosphorylation of the Hippo pathway effectors YAP and TAZ, and expression of genes co-regulated by YAP and TAZ, such as extracellular matrix receptors. In summary, our results indicate that striatin-3 is a novel Rac1 interactor, show that striatin proteins are required for peripheral nervous system development, and reveal a role for Rac1 in regulation of the Hippo pathway in Schwann cells.