Numerous molecular and physiological processes in the skeletal muscle undergo circadian time-dependent oscillations in accordance with daily activity/rest cycles. The circadian regulatory mechanisms underlying these cyclic processes, especially at the post-transcriptional level, are not well defined. Previously, we reported that the circadian E3 ligase FBXL21 mediates rhythmic degradation of the sarcomere protein TCAP in conjunction with GSK-3β, and Psttm mice harboring an Fbxl21 hypomorph allele show reduced muscle fiber diameter and impaired muscle function. To further elucidate the regulatory function of FBXL21 in skeletal muscle, we investigated another sarcomere protein, Myozenin1 (MYOZ1), that we identified as an FBXL21-binding protein from yeast 2-hybrid screening. We show that FBXL21 binding to MYOZ1 led to ubiquitination-mediated proteasomal degradation. GSK-3β co-expression and inhibition were found to accelerate and decelerate FBXL21-mediated MYOZ1 degradation, respectively. Previously, MYOZ1 has been shown to inhibit calcineurin/NFAT signaling important for muscle differentiation. In accordance, Fbxl21 KO and MyoZ1 KO in C2C12 cells impaired and enhanced myogenic differentiation respectively compared with control C2C12 cells, concomitant with distinct effects on NFAT nuclear localization and NFAT target gene expression. Importantly, in Psttm mice, both the levels and diurnal rhythm of NFAT2 nuclear localization were significantly diminished relative to wild-type mice, and circadian expression of NFAT target genes associated with muscle differentiation was also markedly dampened. Furthermore, Psttm mice exhibited significant disruption of sarcomere structure with a considerable excess of MYOZ1 accumulation in the Z-line. Taken together, our study illustrates a pivotal role of FBXL21 in sarcomere structure and muscle differentiation by regulating MYOZ1 degradation and NFAT2 signaling.