This study investigated the effect of mesenchymal stem cells (MSCs) in a PEGylated fibrin gel (PEG) seeded into an acellular extracellular matrix (ECM) on recovery of skeletal muscle following volumetric muscle loss (VML) injury. Approximately 1/3 of the mass of the lateral gastrocnemius (LGAS) was removed from 6–9 month male Sprague‐Dawley rats, and immediately replaced with an ECM of the same dimensions. One week later, animals were injected with: saline (SAL), MSCs, PEG, or MSCs in PEG (PEG+MSC). Fifty‐six days after injury, LGAS maximal isometric tetanic tension (Po) of the PEG+MSC treated group was significantly higher compared to all other treatments due to greater mass. The specific tension (N/cm2) however, was only significantly higher compared to SAL and PEG groups. Myofiber cross‐sectional area (CSA) was evaluated throughout the implanted scaffold. Cell‐treated groups trended towards a greater percentage of larger myofibers compared to SAL and PEG groups. These findings suggest that MSCs provide the main regenerative stimulus when infused at 7 days, and demonstrates their importance in regeneration in VML injury models. Functional assessments via neural stimulation demonstrated neural regeneration, however long–term viability is yet to be determined.