Muscle side population (SP) cells are rare multipotent stem cells that can participate in myogenesis and muscle regeneration upon transplantation. While they have been primarily studied for the development of cell-based therapies for Duchenne muscular dystrophy, little is known regarding their non-muscle lineage choices or whether the dystrophic muscle environment affects their ability to repair muscle. Unfortunately, the study of muscle SP cells has been challenged by their low abundance and the absence of specific SP cell markers. To address these issues, we developed culture conditions for the propagation and spontaneous multi-lineage differentiation of muscle SP cells. Using this approach, we show that SP cells from wild type muscle robustly differentiate into satellite cells and form... myotubes without requiring co-culture with myogenic cells. Furthermore, this myogenic activity is associated with SP cells negative for immune (CD45) and vascular (CD31) markers but positive for Pax7, Sca1, and the mesenchymal progenitor marker PDGFRα. Additionally, our studies revealed that SP cells isolated from dystrophic or cardiotoxin-injured muscle fail to undergo myogenesis. Instead, these SP cells rapidly expand giving rise to fibroblast and adipocyte progenitors (FAPs) and to their differentiated progeny, fibroblasts and adipocytes. Our findings indicate that muscle damage affects the lineage choices of muscle SP cells, promoting their differentiation along fibro-adipogenic lineages while inhibiting myogenesis. These results have implications for a possible role of muscle SP cells in fibrosis and fat deposition in muscular dystrophy. In addition, our studies provide a useful in vitro system to analyze SP cell biology in both normal and pathological conditions.