Muscle spindle stretch receptors mediate myotatic stretch reflexes and limb position information (proprioception) in vertebrates. Sensory (Ia‐afferent) innervation of a small number of myotubes induces their transformation into spindle stretch receptors during skeletal muscle development. Egr3 expression is regulated by Ia‐afferent innervation in developing spindles where it has an essential role in regulating gene expression involved in transducing sensory innervation‐mediated morphogenesis. Whether impaired spindle morphogenesis, which occurs in germline Egr3‐deficient mice, is due to loss of Egr3 expression in skeletal muscle or whether it is due to abnormalities in Ia‐afferent function has not been resolved. Here, we show that loss of Egr3 in skeletal muscles leads to abnormal spindle morphogenesis, ataxia and proprioceptive abnormalities similar to germline Egr3‐deficient mice. By contrast, ablation of Egr3 specifically in Ia‐afferent neurons has no effect on spindle morphogenesis. Thus, Egr3 has a skeletal muscle autonomous role in muscle spindle stretch receptor morphogenesis where it appears to be essential for regulating gene expression required for normal stretch receptor morphogenesis and innervation.