Fibrodysplasia ossificans progressiva (FOP) is a rare genetic disease in which extraskeletal (heterotopic) bone forms within tissues such as skeletal muscles, often in response to injury. Mutations in the BMP type I receptor ACVR1/ALK2 cause FOP by increasing BMP pathway signaling. In contrast to the growing understanding of the inappropriate formation of bone tissue within the muscle in FOP, much is still unknown about the regenerative capacity of adult diseased muscles. Utilizing an inducible ACVR1^R206H knock-in mouse, we found that injured Acvr1^R206H/+ skeletal muscle tissue regenerates poorly. We demonstrated that while two resident stem cell populations, muscle stem cells (MuSCs) and fibro/adipogenic progenitors (FAPs), have similar proliferation rates after injury, the differentiation potential of mutant MuSCs is compromised. Although MuSC-specific deletion of the ACVR1^R206H mutation does not alter the regenerative potential of skeletal muscles in vivo, Acvr1^R206H/+ MuSCs form underdeveloped fibers that fail to fuse in vitro. We further determined that FAPs from Acvr1^R206H/+ mice repress the MuSC-mediated formation of Acvr1^R206H/+ myotubes in vitro. These results identify a previously unrecognized role for ACVR1^R206H in myogenesis in FOP, via improper interaction of tissue-resident stem cells during skeletal muscle regeneration.