Several recent studies suggest the isolation of stem cells in skeletal muscle, but the functional properties of these muscle-derived stem cells is still unclear. In the present study, we report the purification of muscle-derived stem cells from the mdx mouse, an animal model for Duchenne muscular dystrophy. We show that enrichment of desmin(+) cells using the preplate technique from mouse primary muscle cell culture also enriches a cell population expressing CD34 and Bcl-2. The CD34(+) cells and Bcl-2(+) cells were found to reside within the basal lamina, where satellite cells are normally found. Clonal isolation and characterization from this CD34(+)Bcl-2(+) enriched population yielded a putative muscle-derived stem cell, mc13, that is capable of differentiating into both myogenic and osteogenic lineage in vitro and in vivo. The mc13 cells are c-kit and CD45 negative and express: desmin, c-met and MNF, three markers expressed in early myogenic progenitors; Flk-1, a mouse homologue of KDR recently identified in humans as a key marker in hematopoietic cells with stem cell-like characteristics; and Sca-1, a marker for both skeletal muscle and hematopoietic stem cells. Intramuscular, and more importantly, intravenous injection of mc13 cells result in muscle regeneration and partial restoration of dystrophin in mdx mice. Transplantation of mc13 cells engineered to secrete osteogenic protein differentiate in osteogenic lineage and accelerate healing of a skull defect in SCID mice. Taken together, these results suggest the isolation of a population of muscle-derived stem cells capable of improving both muscle regeneration and bone healing.