Myostatin, a negative regulator of myogenesis, is shown to function by controlling the proliferation of myoblasts. In this study we show that myostatin is an inhibitor of myoblast differentiation and that this inhibition is mediated through Smad 3. To determine MyoD expression by Dodamtang treatment, we compared the expression pattern of $C_{2}C_{12}$ mouse myoblasts that constitutively express myostatin with control cells. In vitro, increasing concentrations of Dodamtang reversibly prevented the myogenic blockage of myoblasts by myostatin expression. ELISA assay, Western and confocal analysis indicated that treatment of Dodamtang to the low serum culture media increased the levels of MyoD leading to the inhibition of myogenic differentiation by myostatin. The stable transfection of $C_{2}C_{12}$ myoblasts with myostatin expressing constructs did rescue MyoD-induced myogenic differentiation. Consistent with this, the treatment of Dodamtang rescued the expression of a MyoD in $C_{2}C_{12}$ myoblasts treated with myostatin. Taken together, these results suggest that induction of MyoD by Dodamtang inhibits myostatin activity and expression via SMAD3 resulting in the rescue of the myoblasts to differentiate into myotubes. Thus we propose that myostatin action by Dodamtang plays a critical role in myogenic differentiation and that the muscular hyperplasia and hypertrophy seen in animals that blockage of functional myostatin is because of deregulated proliferation and differentiation of myoblasts.