Differentiation of myocytes is impaired in patients with myotonic dystrophy type 1, DM1. CUG repeat binding protein, CUGBP1, is a key regulator of translation of proteins that are involved in muscle development and differentiation. In this paper, we present evidence that RNA-binding activity of CUGBP1 and its interactions with initiation translation complex eIF2 are differentially regulated during myogenesis by specific phosphorylation and that this regulation is altered in DM1. In normal myoblasts, Akt kinase phosphorylates CUGBP1 at Ser28 and increases interactions of CUGBP1 with cyclin D1 mRNA. During differentiation, CUGBP1 is phosphorylated by cyclinD3-cdk4/6 at Ser302, which increases CUGBP1 binding with p21 and C/EBPbeta mRNAs. While cyclin D3 and cdk4 are elevated in normal myotubes; DM1 differentiating cells do not increase these proteins. In normal myotubes, CUGBP1 interacts with cyclin D3/cdk4/6 and eIF2; however, interactions of CUGBP1 with eIF2 are reduced in DM1 differentiating cells and correlate with impaired muscle differentiation in DM1. Ectopic expression of cyclin D3 in DM1 cells increases the CUGBP1-eIF2 complex, corrects expression of differentiation markers, myogenin and desmin, and enhances fusion of DM1 myoblasts. Thus, normalization of cyclin D3 might be a therapeutic approach to correct differentiation of skeletal muscle in DM1 patients.