Muscle regeneration is a complex process relying on precise teamwork between multiple cell types, including muscle stem cells (MuSCs) and fibroadipogenic progenitors (FAPs). FAPs are also the main source of intramuscular adipose tissue (IMAT). Muscles without FAPs exhibit decreased IMAT infiltration but also deficient muscle regeneration, indicating the importance of FAPs in the repair process. Here, we demonstrate the presence of bidirectional crosstalk between FAPs and MuSCs via their secretion of extracellular vesicles (EVs) containing distinct clusters of miRNAs that is crucial for normal muscle regeneration. Thus, after acute muscle injury, there is activation of FAPs leading to a transient rise in IMAT. These FAPs also release EVs enriched with a selected group of miRNAs, a number of which come from an imprinted region on chromosome 12. The most abundant of these is miR-127-3p, which targets the sphingosine-1-phosphate receptor S1pr3 and activates myogenesis. Indeed, intramuscular injection of EVs from immortalized FAPs speeds regeneration of injured muscle. In late stages of muscle repair, in a feedback loop, MuSCs and their derived myoblasts/myotubes secrete EVs enriched in miR-206-3p and miR-27a/b-3p. The miRNAs repress FAP adipogenesis, allowing full muscle regeneration. Together, the reciprocal communication between FAPs and muscle cells via miRNAs in their secreted EVs plays a critical role in limiting IMAT infiltration while stimulating muscle regeneration, hence providing an important mechanism for skeletal muscle repair and homeostasis.