Salamanders have the remarkable ability to regenerate many body parts following catastrophic injuries, including a fully functional spinal cord following a tail amputation. The molecular basis for how this process is so exquisitely well-regulated, assuring a faithful replication of missing structures every time, remains poorly understood. Therefore a study of microRNA expression and function during regeneration in the axolotl, Ambystoma mexicanum, was undertaken. Using microarray-based profiling, it was found that 78 highly conserved microRNAs display significant changes in expression levels during the early stages of tail regeneration, as compared to mature tissue. The role of miR-196, which was highly upregulated in the early tail blastema and spinal cord, was then further analyzed. Inhibition of miR-196 expression in this context resulted in a defect in regeneration, yielding abnormally shortened tails with spinal cord defects in formation of the terminal vesicle. A more detailed characterization of this phenotype revealed downstream components of the miR-196 pathway to include key effectors/regulators of tissue patterning within the spinal cord, including BMP4 and Pax7. As such, our dataset establishes miR-196 as an essential regulator of tail regeneration, acting upstream of key BMP4 and Pax7-based patterning events within the spinal cord.