In previous studies, we have demonstrated that stress response-induced high glucocorticoid levels could be the underlying cause of traumatic heterotopic ossification (HO), and we have developed a glucocorticoid-induced ectopic mineralization (EM) mouse model by systemic administration of a high dose of dexamethasone (DEX) to animals with muscle injury induced by cardiotoxin injection. In this model, dystrophic calcification (DC) developed into HO in a cell autonomous manner. However, it is not clear how DC is formed after DEX treatment. Therefore, in this study, we aimed to explore how glucocorticoids initiate muscle EM at a cellular and molecular level. We showed that DEX treatment inhibited inflammatory cell infiltration into injured muscle but inflammatory cytokine production in the muscle was significantly increased, suggesting that other non-inflammatory muscle cell types may regulate the inflammatory response and the muscle repair process. Accompanying this phenotype, transforming growth factor beta 1 (TGF-beta 1) expression in fibro-adipogenic progenitors (FAPs) was greatly downregulated. Since TGF-beta 1 is a strong immune suppressor and FAP's regulatory role has a large impact on muscle repair, we hypothesized that downregulation of TGF-beta 1 in FAPs after DEX treatment resulted in this hyperinflammatory state and subsequent failed muscle repair and EM formation. To test our hypothesis, we utilized a transgenic mouse model to specifically knockout Tgfb1 gene in PDGFR alpha-positive FAPs to investigate if the transgenic mice could recapitulate the phenotype that was induced by DEX treatment. Our results showed that the transgenic mice completely phenocopied this hyperinflammatory state and spontaneously developed EM following muscle injury. On the contrary, therapeutics that enhanced TGF-beta 1 signaling in FAPs inhibited the inflammatory response and attenuated muscle EM. In summary, these results indicate that FAPs-derived TGF-beta 1 is a key molecule in regulating muscle inflammatory response and subsequent EM, and that glucocorticoids exert their effect via downregulating TGF-beta 1 in FAPs. Heterotopic ossification (HO) is abnormal bone formation in soft tissue. Glucocorticoids, which have strong anti-inflammatory properties, have usually been used as HO therapeutics. However, our findings suggest that glucocorticoids can also promote HO formation. In this study, we tried to explain the underlying reason for these seemingly contradictory observations. We showed that glucocorticoids, in addition to exerting an anti-inflammatory effect on inflammatory cells, can also target another type of muscle cell to exert a proinflammatory effect. These cells are called fibro-adipogenic progenitors (FAPs), and we demonstrated that FAPs played a master regulatory role in the muscle inflammatory response by modulating the expression of transforming growth factor beta 1 (TGF-beta 1), a well-known immune suppressor. In summary, our findings highlighted the importance of FAP TGF-beta 1 levels in affecting the progression and regression of muscle HO and provided new treatment options for HO based on their ability to elevate TGF-beta 1 levels in FAPs.