Extensive regeneration of the vertebrate body plan is found in salamander and fish species. In these organisms, regeneration takes place through reprogramming of differentiated cells, proliferation, and subsequent redifferentiation of adult tissues. Such plasticity is rarely found in adult mammalian tissues, and this has been proposed as the basis of their inability to regenerate complex structures. Despite their importance, the mechanisms underlying the regulation of the differentiated state during regeneration remain unclear. Here, we analyzed the role of the tumor-suppressor p53 during salamander limb regeneration. The activity of p53 initially decreases and then returns to baseline. Its down-regulation is required for formation of the blastema, and its up-regulation is necessary for the redifferentiation phase. Importantly, we show that a decrease in the level of p53 activity is critical for cell cycle reentry of postmitotic, differentiated cells, whereas an increase is required for muscle differentiation. In addition, we have uncovered a potential mechanism for the regulation of p53 during limb regeneration, based on its competitive inhibition by ΔNp73. Our results suggest that the regulation of p53 activity is a pivotal mechanism that controls the plasticity of the differentiated state during regeneration.