Skeletal muscle is susceptible to injury following trauma, neurological dysfunction, and genetic diseases. Skeletal muscle homeostasis is maintained by a pronounced regenerative capacity, which includes the recruitment of stem cells. Chronic exposure to tumor necrosis factor-alpha (TNF) triggers a muscle wasting reminiscent of cachexia. To better understand the effects of TNF upon muscle homeostasis and stem cells, we exposed injured muscle to TNF at specific time points during regeneration. TNF exposure delayed the appearance of regenerating fibers, without exacerbating fiber death following the initial trauma. We observed modest cellular caspase activation during regeneration, which was markedly increased in response to TNF exposure concomitant with an inhibition in regeneration. Caspase activation did not lead to apoptosis and did not involve caspase-3. Inhibition of caspase activity improved muscle regeneration in either the absence or the presence of TNF, revealing a nonapoptotic role for this pathway in the myogenic program. Caspase activity was localized to the interstitial cells, which also express Sca-1, CD34, and PW1. Perturbation of PW1 activity blocked caspase activation and improved regeneration. The restricted localization of Sca-1+, CD34+, PW1+ cells to a subset of interstitial cells with caspase activity reveals a critical regulatory role for this population during myogenesis, which may directly contribute to resident muscle stem cells or indirectly regulate stem cells through cell-cell interactions.