Fibro-adipogenic progenitors (FAPs) are important components of the skeletal muscle regenerative environment. Whether FAPs support muscle regeneration or promote fibro-adipogenic degeneration is emerging as a key determinant in the pathogenesis of muscular diseases, including Duchenne muscular dystrophy (DMD). However, the molecular mechanism that controls FAP lineage commitment and activity is currently unknown. We show here that an HDAC–myomiR–BAF60 variant network regulates the fate of FAPs in dystrophic muscles of mdx mice. Combinatorial analysis of gene expression microarray, genome-wide chromatin remodeling by nuclease accessibility (NA) combined with next-generation sequencing (NA-seq), small RNA sequencing (RNA-seq), and microRNA (miR) high-throughput screening (HTS) against SWI/SNF BAF60 variants revealed that HDAC inhibitors (HDACis) derepress a “latent” myogenic program in FAPs from dystrophic muscles at early stages of disease. Specifically, HDAC inhibition induces two core components of the myogenic transcriptional machinery, MYOD and BAF60C, and up-regulates the myogenic miRs (myomiRs) (miR-1.2, miR-133, and miR-206), which target the alternative BAF60 variants BAF60A and BAF60B, ultimately directing promyogenic differentiation while suppressing the fibro-adipogenic phenotype. In contrast, FAPs from late stage dystrophic muscles are resistant to HDACi-induced chromatin remodeling at myogenic loci and fail to activate the promyogenic phenotype. These results reveal a previously unappreciated disease stage-specific bipotency of mesenchimal cells within the regenerative environment of dystrophic muscles. Resolution of such bipotency by epigenetic intervention with HDACis provides a molecular rationale for the in situ reprogramming of target cells to promote therapeutic regeneration of dystrophic muscles.