HDAC inhibitors (HDACi) exert beneficial effects in mdx mice, by promoting endogenous regeneration; however, the cellular determinants of HDACi activity on dystrophic muscles have not been determined. We show that fibroadipogenic progenitors (FAP) influence the regeneration potential of satellite cells during disease progression in mdx mice and mediate HDACi ability to selectively promote regeneration at early stages of disease. FAPs from young mdx mice promote, while FAPs from old mdx mice repress, satellite cell-mediated formation of myotubes. In young mdx mice HDACi inhibited FAP adipogenic potential, while enhancing their ability to promote differentiation of adjacent satellite cells, through upregulation of the soluble factor follistatin. By contrast, FAPs from old mdx mice were resistant to HDACi-mediated inhibition of adipogenesis and constitutively repressed satellite cell-mediated formation of myotubes. We show that transplantation of FAPs from regenerating young muscles restored HDACi ability to increase myofibre size in old mdx mice. These results reveal that FAPs are key cellular determinants of disease progression in mdx mice and mediate a previously unappreciated stage-specific beneficial effect of HDACi in dystrophic muscles.