Tissue regeneration requires inflammatory and reparatory activity of macrophages. Macrophages detect and eliminate the damaged tissue and subsequently promote regeneration. This dichotomy requires the switch of effector functions of macrophages coordinated with other cell types inside the injured tissue. The gene regulatory events supporting the sensory and effector functions of macrophages involved in tissue repair are not well understood. Here we show that the lipid activated transcription factor, PPARγ, is required for proper skeletal muscle regeneration, acting in repair macrophages. PPARγ controls the expression of the transforming growth factor-β (TGF-β) family member, GDF3, which in turn regulates the restoration of skeletal muscle integrity by promoting muscle progenitor cell fusion. This work establishes PPARγ as a required metabolic sensor and transcriptional regulator of repair macrophages. Moreover, this work also establishes GDF3 as a secreted extrinsic effector protein acting on myoblasts and serving as an exclusively macrophage-derived regeneration factor in tissue repair.