The mechanism of skeletal myoblast fusion is not well understood. We show that endogenous nitric oxide (NO) generation is required for myoblast fusion both in embryonic myoblasts and in satellite cells. The effect of NO is concentration and time dependent, being evident only at the onset of differentiation, and direct on the fusion process itself. The action of NO is mediated through a tightly regulated activation of guanylate cyclase and generation of cyclic guanosine monophosphate (cGMP), so much so that deregulation of cGMP signaling leads to a fusion-induced hypertrophy of satellite-derived myotubes and embryonic muscles, and to the acquisition of fusion competence by myogenic precursors in the presomitic mesoderm. NO and cGMP induce expression of follistatin, and this secreted protein mediates their action in myogenesis. These results establish a hitherto unappreciated role of NO and cGMP in regulating myoblast fusion and elucidate their mechanism of action, providing a direct link with follistatin, which is a key player in myogenesis.