Although the ability of engrafted stem cells to regenerate tissue has received much attention, the molecular mechanisms controlling regeneration are poorly understood. In the Drosophila male germline, local activation of the Janus kinase-signal transducer and activator of transcription (Jak-STAT) pathway maintains stem cells; germline stem cells lacking Jak-STAT signaling differentiate into spermatogonia without self-renewal. By conditionally manipulating Jak-STAT signaling, we find that spermatogonia that have initiated differentiation and are undergoing limited mitotic (transit-amplifying) divisions can repopulate the niche and revert to stem cell identity. Thus, in the appropriate microenvironment, transit-amplifying cells dedifferentiate, becoming functional stem cells during tissue regeneration.