Pluripotent embryonic stem (ES) cells hold great potential for cell-based therapies. Although several recent studies have reported the potential of ES cell-derived progenitors for skeletal muscle regeneration, how the cells contribute to reconstitution of the damaged myofibers has remained elusive. Here, we demonstrated the process of injured muscle regeneration by the engraftment of ES cell-derived mesodermal progenitors. Mesodermal progenitor cells were induced by a conventional differentiation system and isolated by flow cytometer of platelet-derived growth factor receptor-alpha (PDGFR-alpha), a marker of paraxial mesoderm, and vascular endothelial growth factor receptor-2 (VEGFR-2), a marker of lateral mesoderm. The PDGFR-alpha(+) population that represented the paraxial mesodermal character demonstrated significant engraftment when transplanted into the injured muscle of immunodeficient mouse. Moreover, the PDGFR-alpha(+) population could differentiate into the muscle satellite cells that were the stem cells of adult muscle and characterized by the expression of Pax7 and CD34. These ES cell-derived satellite cells could form functional mature myofibers in vitro and generate myofibers fused with the damaged host myofibers in vivo. On the other hand, the PDGFR-alpha(-)VEGFR-2(+) population that showed lateral mesodermal character exhibited restricted potential to differentiate into the satellite cells in injured muscle. Our results show the potential of ES cell-derived paraxial mesodermal progenitor cells to generate functional muscle stem cells in vivo without inducing or suppressing gene manipulation. This knowledge could be used to form the foundation of the development of stem cell therapies to repair diseased and damaged muscles.