Muscle regeneration relies on adult muscle stem (satellite) cells. Inflammatory cues released within the regenerative microenvironment, such as TNFα, instruct different components of the satellite cell niche toward specialized tasks by regulating specific subsets of genes in each individual cell type. However, how regeneration cues are deciphered and interpreted by the multitude of cell types within the regenerative environment is unknown. We have recently identified an inflammation-activated signaling, consisting of p38α-mediated recruitment of polycomb repressive complex 2 (PRC2) to the Pax7 promoter, in satellite cells. Here we show that p38α-PRC2 regulation of Pax7 expression is restricted to a discrete stage of satellite cell-mediated regeneration. In activated satellite cells, Pax7 locus shows a “bivalent” chromatin signature, with co-existence of H3-K273me and H3-K43me, that appears to confer responsiveness to p38α-PRC2 signaling. p38α activation resolves bivalence to H3-K273me which results in Pax7 repression, while p38α blockade promotes Pax7 expression by preventing PRC2-mediated H3-K273me and leading to relative increase in H3-K43me. Interestingly, in satellite cell-derived myotubes Pax7 expression cannot be re-induced by p38α blockade, revealing a post-mitotic resistance of Pax7 gene to inflammatory cues. Likewise, in other cell types, such as muscle-derived fibroblasts, Pax7 locus is constitutively repressed by PRC2 and is unresponsive to p38α signaling. Finally, we show that Pax7 repression in embryonic stem cells is not directed by p38α signaling, although it is mediated by PRC2. This evidence indicates a cell type- and differentiation-stage specific control of Pax7 transcription by the p38α-PRC2.