Lin-28 is a highly conserved, RNA-binding, microRNA-regulated protein that is involved in regulation of developmental timing in Caenorhabditis elegans. In mammals, Lin-28 is stage-specifically expressed in embryonic muscle, neurons, and epithelia, as well as in embryonic carcinoma cells, but is suppressed in most adult tissues, with the notable exception of skeletal and cardiac muscle. The specific function and mechanism of action of Lin-28 are not well understood. Here we used loss-of-function and gain-of-function assays in cultured myoblasts to show that expression of Lin-28 is essential for skeletal muscle differentiation in mice. In order to elucidate the specific function of Lin-28, we used a combination of biochemical and functional assays, which revealed that, in differentiating myoblasts, Lin-28 binds to the polysomes and increases the efficiency of protein synthesis. An important target of Lin-28 is IGF-2, a crucial growth and differentiation factor for muscle tissue. Interaction of Lin-28 with translation initiation complexes in skeletal myoblasts and in the embryonic carcinoma cell line P19 was confirmed by localization of Lin-28 to the stress granules, temporary structures that contain stalled mRNA-protein translation complexes. Our results unravel novel mechanisms of translational regulation in skeletal muscle and suggest that Lin-28 performs the role of "translational enhancer" in embryonic and adult cells and tissues.