We have shown that decorin, a small leucine-rich proteoglycan, can inhibit transforming growth factor (TGF)-beta1 to prevent fibrous scar formation and improve muscle healing after injury. In the decorin-treated muscle, an enhancement of muscle regeneration is observed through histological examination. In this article, we report our determination of whether decorin has a direct effect on myogenic cells' differentiation. Our results indicate that myoblasts genetically engineered to express decorin (CD cells) differentiated into myotubes at a significantly higher rate than did control myoblasts (C2C12). This enhanced differentiation led to the up-regulation of myogenic genes (Myf5, Myf6, MyoD, and myogenin) in CD cells in vitro. We speculate that the higher rate of differentiation exhibited by the CD cells is due to the up-regulation of follistatin, peroxisome-proliferator-activated receptor-gamma co-activator-1alpha (PGC-1alpha), p21, and the myogenic genes, and the down-regulation of TGF-beta1 and myostatin. Decorin gene transfer in vivo promoted skeletal muscle regeneration and accelerated muscle healing after injury. These results suggest that decorin not only prevents fibrosis but also improves muscle regeneration and repair.