In mammals, the loss of a limb is irreversible. By contrast, urodele amphibians and teleost fish are capable of nearly perfect regeneration of lost appendages. This ability depends on direct interaction between the wound epithelium and mesenchymal progenitor cells of the blastema. It has been known for decades that contact between the wound epithelium and the underlying blastema is essential for successful regeneration. However, the underlying mechanisms are poorly understood. Here, we show that upon amputation the blastema induces expression of the ligand Igf2b, which then activates IGF signaling specifically in cells of the adjacent apical epithelium. Inhibition of IGF signaling by either morpholino antisense technology, or by specific chemical inhibitors of Igf1 receptor function NVP-AEW541 and NVP-ADW742, impairs fin regeneration. At the cellular level, this block in regeneration is reflected by a lack of the distinctive basal epithelium, increased apoptosis in the wound epidermis and reduced proliferation of blastema cells. Furthermore, induction of the blastemal and wound epidermal markers cannot be supported in the absence of IGF signaling. These data provide evidence that Igf2b expressed in the blastema promotes the properties of the adjacent wound epidermis, which subsequently are necessary for blastema function. Thus, IGF signaling upregulated upon fin amputation represents a signal from the blastema to the wound epithelium, a crucial step in appendage regeneration.