During tail regeneration in urodele amphibians such as axolotls, all of the tissue types, including muscle, dermis, spinal cord, and cartilage, are regenerated. It is not known how this diversity of cell types is reformed with such precision. In particular, the number and variety of mature cell types in the remaining stump that contribute to the blastema is unclear. Using Nomarski imaging, we followed the process of regeneration in the larval axolotl tail. Combining this with in vivo fluorescent labeling of single muscle fibers, we show that mature muscle dedifferentiates. Muscle dedifferentiation occurs by the synchronous fragmentation of the multinucleate muscle fiber into mononucleate cells followed by rapid cell proliferation and the extension of cell processes. We further show that direct clipping of the muscle fiber and severe tissue damage around the fiber are both required to initiate dedifferentiation. Our observations also make it possible to estimate for the first time how many of the blastema cells arise specifically from muscle dedifferentiation. Calculations based on our data suggest that up to 29% of nondermal-derived cells in the blastema come from dedifferentiation of mature muscle fibers. Overall, these results show that endogenous multinucleate muscle fibers can dedifferentiate into mononucleate cells and contribute significantly to the blastema.