Type 2 diabetes mellitus (T2DM) is associated with impaired skeletal muscle function and degeneration of the skeletal muscles. However, the mechanisms underlying the degeneration are not well described in human skeletal muscle. Here we show that skeletal muscle of T2DM patients exhibit degenerative remodeling of the extracellular matrix that is associated with a selective increase of a subpopulation of fibro-adipogenic progenitors (FAPs) marked by expression of THY1 (CD90)—the FAP^CD90+. We identify platelet-derived growth factor (PDGF) as a key FAP regulator, as it promotes proliferation and collagen production at the expense of adipogenesis. FAPs^CD90+ display a PDGF-mimetic phenotype, with high proliferative activity, clonogenicity, and production of extracellular matrix. FAP^CD90+ proliferation was reduced by in vitro treatment with metformin. Furthermore, metformin treatment reduced FAP content in T2DM patients. These data identify a PDGF-driven conversion of a subpopulation of FAPs as a key event in the fibrosis development in T2DM muscle.