Development is regulated by various factors, including protein methylation status. While PRMT5 is well known for its roles in oncogenesis by mediating symmetric di-methylation of arginine, its role in normal development remains elusive. Using Myod1Cre to drive Prmt5 knockout in embryonic myoblasts (Prmt5MKO), we dissected the role of PRMT5 in myogenesis. The Prmt5MKO mice are born normally but exhibit progressive muscle atrophy and premature death. Prmt5MKO inhibits proliferation and promotes premature differentiation of embryonic myoblasts, reducing the number and regenerative function of satellite cells in postnatal mice. Mechanistically, PRMT5 methylates and destabilizes FoxO1. Prmt5MKO increases the total FoxO1 level and promotes its cytoplasmic accumulation, leading to activation of autophagy and depletion of lipid droplets (LDs). Systemic inhibition of autophagy in Prmt5MKO mice restores LDs in myoblasts and moderately improves muscle regeneration. Together, PRMT5 is essential for muscle development and regeneration at least partially through mediating FoxO1 methylation and LD turnover. Display omitted •PRMT5 is essential for muscle development and function in vivo•PRMT5 regulates fate of muscle stem cells and muscle regenerative capacity•PRMT5 governs autophagy through FoxO1 methylation, influencing its subcellular localization•Autophagy inhibition partially improves muscle regeneration in Prmt5 KO mice Kim et al. report the role of PRMT5 in muscle development using knockout (KO) mice. Myoblast-specific Prmt5-KO impairs myogenesis and causes premature death. PRMT5 regulates subcellular localization of FoxO1, which influences autophagy of lipid droplets. The work uncovers an interplay between PRMT5, FoxO1, and lipophagy essential for muscle development.