Cell-cycle arrest is thought to be required for differentiation of muscle cells. However, the molecules controlling cell-cycle exit and the differentiation step(s) dependent on cell-cycle arrest are poorly understood. Here we show that two Cdk inhibitors, p21(CIP1) and p57(KIP2), redundantly control differentiation of skeletal muscle and alveoli in the lungs. Mice lacking both p21 and p57 fail to form myotubes, display increased proliferation and apoptotic rates of myoblasts, and display endoreplication in residual myotubes. This point of arrest during muscle development is identical to that of mice lacking the myogenic transcription factor myogenin, indicating a role for cell-cycle exit in myogenin function. Expression of myogenin, p21, and p57 is parallel but independent, and in response to differentiation signals, these proteins are coordinately regulated to trigger both cell-cycle exit and a dependent muscle-specific program of gene expression to initiate myoblast terminal differentiation and muscle formation.