Background/Aims: Muscle fibrosis and fatty infiltration (FI) are common complications seen in various muscle disease states. Recent studies indicate that muscle residential fibro/adipogenic progenitors (FAPs) are the major cellular source for muscle fibrosis and FI. We previously showed that MMP13 knockout (KO) mice have significantly increased FI, suggesting an important role of MMP13 in muscle FI. However, how MMP13 affects the differentiation of FAPs remains unknown. Methods: In order to assess the role of MMP-13 on FAP differentiation, we isolated FAPs from wildtype C57BL/6 and MMP13 knock out mice with FACS using CD31-, CD45-, Integrin α7- and Sca-1+ markers. FAPs were cultured in 24 well plate after FACS.in standard media till 80% confluent and then switched to adipogenic medium. In order to study the role of TGFβ and BMP in their differentiation, FAPs from both wildtype and MMP13 KO mice were treated with TGFβ1 (5 ng/ml). For MMP13 inhibitor treatment, FAPs from wildtype mice were incubated in adipogenic medium containing 10 µM MMP13 inhibitor (or vehicle) for 2 weeks. Immunofluorescence and gene expression analysis were used to assess FAP adipogenic and fibrogenic differentiation. FAPs were stained with Perilipin A (FITC, adipogenesis marker) and αSMA (Red, fibroblast marker), and DAPI. Real time PCR was performed for gene expression evaluation. A two-tailed Anova was used for statistical comparisons between groups, with p ≤ 0.05. Data are presented as mean ± standard deviation. Results: In this study, we isolated FAPs from wildtype C57BL/6 and MMP13 KO mice and evaluated their adipogenic and fibrogenic differentiation in vitro . MMP13 KO FAPs demonstrated enhanced adipogenesis but reduced fibrogenesis compared to wildtype FAPs. Treating wildtype FAPs with an MMP13 inhibitor simulated phenotypes seen in MMP13 KO FAPs. In order to assess the role of MMP13 on TGFβ/BMP signaling in regulating FAP differentiation, we treated wildtype and MMP13 KO FAPs with TGFβ1, BMP7, TGFβ inhibitor, and BMP inhibitor. TGFβ1 treatment significantly enhanced fibrogenesis, but inhibited adipogenesis of wildtype FAPs. However, treatment with BMP7 showed the opposite effect. Interestingly, the effect of TGFβ1/BMP7 was voided in MMP13 KO FAPs. Treating wildtype FAPs with MMP13 inhibitor also abolished the effect of TGFβ1/BMP7 in FAP differentiation. Conclusion: Results from this study showed that TGFβ1 inhibits FAP adipogenesis but stimulates FAP fibrogenesis. BMP7 was shown to promote FAP adipogenesis but reduce its fibrogenesis. The role of the TGFβ/BMP signaling pathway regulating FAP differentiation was found to be MMP13 dependent. This study suggests that MMP13 is a critical downstream effector in TGFβ/BMP pathway which may serve as a new therapeutic target for muscle fibrosis and FI.