Extracellular signaling pathways regulating myoblast differentiation and cell-cycle withdrawal are not completely understood. Stem cell antigen-1 (Sca-1/Ly-6A/E) is a glycosylphosphatidylinositol-anchored membrane protein known for its role in T-cell activation, and recently described as a marker for regeneration-competent myoblasts. We previously determined that expression of Sca-1/Ly-6A is transiently upregulated during myocyte cell-cycle withdrawal; however, a specific function for Sca-1 in myogenesis has not been described. Here, we show that Sca-1 expression on the surface of a subpopulation of differentiating C2C12 myoblasts is maximal at the time of cell-cycle withdrawal, and that blocking Sca-1 with monoclonal antibodies or downregulating Sca-1 expression by antisense both promotes proliferation and inhibits myotube formation. Downregulating Sca-1 expression derepresses Fyn at the time of myoblast cell-cycle withdrawal, and dominant-negative and constitutively active Fyn mutants rescue and recapitulate the Sca-1 antisense phenotype, respectively. This suggests a Fyn-mediated mechanism for Sca-1 action. Thus, we demonstrate an unprecedented role for Sca-1 in early myogenesis in C2C12 cells, and propose a novel pathway from the myoblast cell surface to intracellular signaling networks controlling proliferation versus differentiation in mammalian muscle. These findings suggest that, beyond its role as a marker for muscle progenitors, Sca-1 may be an important therapeutic target for promoting muscle regeneration.