The intestine is a highly dynamic environment that requires tight control of the various inputs to maintain homeostasis and allow for proper responses to injury. It was recently found that the stem cell niche and epithelium is regenerated after injury by de-differentiated adult cells, through a process that gives rise to Sca1+ fetal-like cells and is driven by a transient population of Clu+ revival stem cells (revSCs). However, the molecular mechanisms that regulate this dynamic process have not been fully defined. Here we show that TNFAIP8 (also known as TIPE0) is a regulator of intestinal homeostasis that is vital for proper regeneration. TIPE0 functions through inhibiting basal Akt activation by the commensal microbiota via modulating membrane phospholipid abundance. Loss of TIPE0 in mice results in injury-resistant enterocytes, that are hyperproliferative, yet have regenerative deficits and are shifted towards a de-differentiated state. Tipe0-/- enterocytes show basal induction of the Clu+ regenerative program and a fetal gene expression signature marked by Sca1, but upon injury are unable to generate Sca-1+/Clu+ revSCs and could not regenerate the epithelium. This work demonstrates the role of TIPE0 in regulating the dynamic signaling that determines the injury response and enables intestinal epithelial cell regenerative plasticity.