Positional information driving limb muscle patterning is contained in connective tissue fibroblasts but not in myogenic cells. Limb muscles originate from somites, while connective tissues originate from lateral plate mesoderm. With cell and genetic lineage tracing we challenge this model and identify an unexpected contribution of lateral plate-derived fibroblasts to the myogenic lineage, preferentially at the myotendinous junction. Analysis of single-cell RNA-sequencing data from whole limbs at successive developmental stages identifies a population displaying a dual muscle and connective tissue signature. BMP signalling is active in this dual population and at the tendon/muscle interface. In vivo and in vitro gain- and loss-of-function experiments show that BMP signalling regulates a fibroblast-to-myoblast conversion. These results suggest a scenario in which BMP signalling converts a subset of lateral plate mesoderm-derived cells to a myogenic fate in order to create a boundary of fibroblast-derived myonuclei at the myotendinous junction that controls limb muscle patterning.