Coordination of stem cell activity with inflammatory responses is critical for regeneration and homeostasis of barrier epithelia. The temporal sequence of cell interactions during injury-induced regeneration is only beginning to be understood. Here we show that intestinal stem cells (ISCs) are regulated by macrophage-like haemocytes during the early phase of regenerative responses of the Drosophila intestinal epithelium. On tissue damage, haemocytes are recruited to the intestine and secrete the BMP homologue DPP, inducing ISC proliferation by activating the type I receptor Saxophone and the Smad homologue SMOX. Activated ISCs then switch their response to DPP by inducing expression of Thickveins, a second type I receptor that has previously been shown to re-establish ISC quiescence by activating MAD. The interaction between haemocytes and ISCs promotes infection resistance, but also contributes to the development of intestinal dysplasia in ageing flies. We propose that similar interactions influence pathologies such as inflammatory bowel disease and colorectal cancer in humans.