Fatty infiltration, the ectopic deposition of adipose tissue within skeletal muscle, is mediated via the adipogenic differentiation of fibro-adipogenic progenitors (FAPs). We used single-nuclei and single-cell RNA sequencing to characterize FAP heterogeneity in patients with fatty infiltration. We identified an MME FAP subpopulation which, based on ex vivo characterization as well as transplantation experiments, exhibits high adipogenic potential. MME FAPs are characterized by low activity of WNT, known to control adipogenic commitment, and are refractory to the inhibitory role of WNT activators. Using preclinical models for muscle damage versus fatty infiltration, we show that many MME FAPs undergo apoptosis during muscle regeneration and differentiate into adipocytes under pathological conditions, leading to a reduction in their abundance. Finally, we utilized the varying fat infiltration levels in human hip muscles and found less MME FAPs in fatty infiltrated human muscle. Altogether, we have identified the dominant adipogenic FAP subpopulation in skeletal muscle.