Myostatin, a Transforming Growth Factor-beta (TGF-beta) super-family member, has previously been shown to negatively regulate satellite cell activation and self-renewal. However, to date the mechanism behind Myostatin function in satellite cell biology is not known. Here we show that Myostatin signals via a Pax7-dependent mechanism to regulate satellite cell self-renewal. While excess Myostatin inhibited Pax7 expression via ERK1/2 signaling, an increase in Pax7 expression was observed following both genetic inactivation and functional antagonism of Myostatin. As a result, we show that either blocking or inactivating Myostatin enhances the partitioning of the fusion-incompetent self-renewed satellite cell lineage (high Pax7 expression, low MyoD expression) from the pool of actively proliferating myogenic precursor cells. Consistent with this result, over-expression of Pax7 in C2C12 myogenic cells resulted in increased self-renewal through a mechanism which slowed both myogenic proliferation and differentiation. Taken together, these results suggest that increased expression of Pax7 promotes satellite cell self-renewal, and furthermore Myostatin may control the process of satellite cell self-renewal through regulation of Pax7. Thus we speculate that, in addition to the intrinsic factors (such as Pax7), extrinsic factors both positive and negative in nature, will play a major role in determining the stemness of skeletal muscle satellite cells.