Abstract Plexiform neurofibromas are benign nerve sheath Schwann cell tumors characterized by biallelic mutations in the neurofibromatosis type 1 (NF1) tumor suppressor gene. Atypical neurofibromas show additional frequent loss of CDKN2A/Ink4a/Arf and may be precursor lesions of aggressive malignant peripheral nerve sheath tumors (MPNST). Here we combined loss of Nf1 in developing Schwann cells with global Ink4a/Arf loss and identified paraspinal plexiform neurofibromas and atypical neurofibromas. Upon transplantation, atypical neurofibromas generated genetically engineered mice (GEM)-PNST similar to human MPNST, and tumors showed reduced p16INK4a protein and reduced senescence markers, confirming susceptibility to transformation. Superficial GEM-PNST contained regions of nerve-associated plexiform neurofibromas or atypical neurofibromas and grew rapidly on transplantation. Transcriptome analyses showed similarities to corresponding human tumors. Thus, we recapitulated nerve tumor progression in NF1 and provided preclinical platforms for testing therapies at each tumor grade. These results support a tumor progression model in which loss of NF1 in Schwann cells drives plexiform neurofibromas formation, additional loss of Ink4a/Arf contributes to atypical neurofibromas formation, and further changes underlie transformation to MPNST. Significance: New mouse models recapitulate the stepwise progression of NF1 tumors and will be useful to define effective treatments that halt tumor growth and tumor progression in NF1.