Cachexia is a debilitating condition characterized by extreme skeletal muscle wasting that contributes significantly to morbidity and mortality. Efforts to elucidate the underlying mechanisms of muscle loss have predominantly focused on events intrinsic to the myofiber. In contrast, less regard has been given to potential contributory factors outside the fiber within the muscle microenvironment. In tumor-bearing mice and patients with pancreatic cancer, we found that cachexia was associated with a type of muscle damage resulting in activation of both satellite and nonsatellite muscle progenitor cells. These muscle progenitors committed to a myogenic program, but were inhibited from completing differentiation by an event linked with persistent expression of the self-renewing factor Pax7. Overexpression of Pax7 was sufficient to induce atrophy in normal muscle, while under tumor conditions, the reduction of Pax7 or exogenous addition of its downstream target, MyoD, reversed wasting by restoring cell differentiation and fusion with injured fibers. Furthermore, Pax7 was induced by serum factors from cachectic mice and patients, in an NF-κB–dependent manner, both in vitro and in vivo. Together, these results suggest that Pax7 responds to NF-κB by impairing the regenerative capacity of myogenic cells in the muscle microenvironment to drive muscle wasting in cancer.