Background: The unmet medical needs in repairing large muscle defects promote the development of tissue regeneration strategy. The use of bioactive molecules in combination with biomaterial scaffold has become an area of great interest. SW033291, a small-molecule inhibitor targeting 15-hydroxyprostaglandin dehydrogenase (15-PDGH) and subsequently elevating the production of prostaglandin E2 (PGE2), has been proved to accelerate the recovery and potentiate the regeneration of multiple tissues including the bone, liver, and colon. The limited understanding of the potential therapeutic effects on myogenesis motivated us to investigate the role of SW033291 in regulating muscle-derived stem cell (MDSC) myogenic differentiation and MDSC-mediated muscle regeneration. Methods: The characteristics of rat MDSCs, including cell-specific markers and myogenic differentiation potential, were determined. MDSCs were incubated with SW033291 to evaluate PGE2 production and cytotoxicity. The effects of SW033291 on MDSC myogenic differentiation were assessed by quantitative real-time polymerase chain reaction (qPCR), western blot, and immunocytochemistry. The fibrin gel containing MDSCs and SW033291 was used for muscle regeneration in a tibialis anterior muscle defect model. Results: Our data demonstrated that MDSCs were well-tolerated to SW033291 and treatment with SW033291 significantly promoted the production of PGE2 by MDSCs. In vitro analysis showed that SW033291 enhanced the myogenic differentiation and myotube formation by upregulating a series of myogenic markers. Additionally, the activation of PI3K/Akt pathway was involved in the mechanism underlying these promotive effects. Then, in situ casting of fibrin gel containing MDSCs and SW033291 was used to repair the tibialis anterior muscle defect; the addition of SW033291 significantly promoted myofiber formation within the defect region with mild immune response, less fibrosis, and sufficient vascularization. Conclusion: SW033291 acted as a positive regulator of MDSC myogenic differentiation, and incorporating the compound with MDSCs in fibrin gel could serve as an effective method to repair large skeletal muscle defects.