Pax genes encode evolutionarily conserved transcription factors that play critical roles in development. Pax3 and Pax7 constitute one of the four Pax subfamilies. Despite partially overlapping expression domains, mouse mutations for Pax3 and Pax7 have very different consequences. To investigate the mechanism of these contrasting phenotypes, we replaced Pax3 by Pax7 by using gene targeting in the mouse. Pax7 can substitute for Pax3 function in dorsal neural tube, neural crest cell, and somite development, but not in the formation of muscles involving long-range migration of muscle progenitor cells. In limbs in which Pax3 is replaced by Pax7, the severity of the muscle phenotype increases as the number of Pax7 replacement alleles is reduced, with the forelimb more affected than the hindlimb. We show that this hypomorphic activity of Pax7 is due to defects in delamination, migration, and proliferation of muscle precursor cells with inefficient activation of c-met in the hypaxial domain of the somite. Despite this, overall muscle patterning is retained. We conclude that functions already prefigured by the single Pax3/7 gene present before vertebrate radiation are fulfilled by Pax7 as well as Pax3, whereas the role of Pax3 in appendicular muscle formation has diverged, reflecting the more recent origin of this mode of myogenesis.