IBD syndromes such as Crohn's disease and ulcerative colitis result from the inflammation of specific intestinal segments. Although many studies have reported on the regenerative response of intestinal progenitor and stem cells to tissue injury, very little is known about the response of differentiated lineages to inflammatory cues. Here, we show that acute inflammation of the mouse small intestine is followed by a dramatic loss of Lgr5+ stem cells. Instead, Paneth cells re-enter the cell cycle, lose their secretory expression signature, and acquire stem-like properties, thus contributing to the tissue regenerative response to inflammation. Stem cell factor secretion upon inflammation triggers signaling through the c-Kit receptor and a cascade of downstream events culminating in GSK3β inhibition and Wnt activation in Paneth cells. Hence, the plasticity of the intestinal epithelium in response to inflammation goes well beyond stem and progenitor cells and extends to the fully differentiated and post-mitotic Paneth cells.