Mutations in the Survival of Motor Neuron (SMN) gene underlie the development of spinal muscular atrophy (SMA), which currently represents the leading genetic cause of mortality in infants and toddlers. SMA is characterized by degeneration of spinal cord motor neurons and muscle atrophy. Although SMA is often considered to be a motor neuron disease, accumulating evidence suggests that muscle cells themselves may be affected by low levels of SMN. Here, we examine satellite cells, tissue-resident stem cells that play an essential role in the growth and repair of skeletal muscle, isolated from a severe SMA mouse model (Smn^−/−; SMN2^+/+). We found similar numbers of satellite cells in the muscles of SMA and wild-type (Smn^+/+; SMN2^+/+) mice at postnatal day 2 (P2), and, when isolated from skeletal muscle using cell surface marker expression, these cells showed comparable survival and proliferative potential. However, SMA satellite cells differentiate abnormally, revealed by the premature expression of muscle differentiation markers, and, especially, by a reduced efficiency in forming myotubes. These phenotypes suggest a critical role of SMN protein in the intrinsic regulation of muscle differentiation and suggest that abnormal muscle development contributes to the manifestation of SMA symptoms.