Skeletal muscle is a regenerative tissue which can repair damaged myofibers through the activation of tissue-resident muscle stem cells (MuSCs). Many muscle diseases with impaired regeneration cause excessive adipose tissue accumulation in muscle, alter the myogenic fate of MuSCs, and deregulate the cross-talk between MuSCs and fibro/adipogenic progenitors (FAPs), a bi-potent cell population which supports myogenesis and controls intra-muscular fibrosis and adipocyte formation. In order to better characterize the interaction between adipogenesis and myogenesis, we studied muscle regeneration and MuSC function in whole body Pparg null mice generated by epiblast-specific Cre/lox deletion (Pparg^Δ/Δ). We demonstrate that deletion of PPARγ completely abolishes ectopic muscle adipogenesis during regeneration and impairs MuSC expansion and myogenesis after injury. Ex vivo assays revealed that perturbed myogenesis in Pparg^Δ/Δ mice does not primarily result from intrinsic defects of MuSCs or from perturbed myogenic support from FAPs. The immune transition from a pro- to anti-inflammatory MuSC niche during regeneration is perturbed in Pparg^Δ/Δ mice and suggests that PPARγ signaling in macrophages can interact with ectopic adipogenesis and influence muscle regeneration. Altogether, our study demonstrates that a PPARγ-dependent adipogenic response regulates muscle fat infiltration during regeneration and that PPARγ is required for MuSC function and efficient muscle repair.