Sporadic inclusion body myositis (IBM) is the most common acquired muscle disease in adults over age 50, yet it remains unclear whether the disease is primarily driven by T cell-mediated autoimmunity. IBM muscle biopsies exhibit nuclear clearance and cytoplasmic aggregation of TDP-43 in muscle cells, a pathologic finding observed initially in neurodegenerative disease, and nuclear loss of TDP-43 in neurons causes aberrant RNA splicing. Here, we show that loss of TDP-43 splicing repression, as determined by inclusion of cryptic exons, occurs in skeletal muscle of IBM patients. Out of 119 muscle biopsies tested, RT-PCR-mediated detection of cryptic exon expression is 84% sensitive and 99% specific for diagnosing IBM, indicating utility as a functional and diagnostic biomarker. To determine the role of T cells in pathogenesis, we generated a novel xenograft model by transplanting human IBM muscle into the hindlimb of immunodeficient mice. Xenografts from IBM patients display robust regeneration of human myofibers and recapitulate both inflammatory and degenerative features of the disease. Myofibers in IBM xenografts are invaded by human, oligoclonal CD8+ T cells and exhibit MHC-I upregulation, rimmed vacuoles, mitochondrial pathology, p62-positive inclusions, and nuclear clearance and cytoplasmic aggregation of TDP-43, resulting in expression of cryptic exons. Depletion of human T cells within IBM xenografts by treating mice intraperitoneally with anti-CD3 (OKT3) suppresses MHC-I upregulation, but rimmed vacuoles and loss of TDP-43 function persist. These data suggest that myofiber degeneration occurs independent of T cells, and muscle cell-intrinsic mechanisms, such as loss of TDP-43 splicing repression, drive IBM pathogenesis.