The epidermal growth factor receptor ligand Amphiregulin has a well-documented role in the restoration of tissue homeostasis after injury; however, the mechanism by which Amphiregulin contributes to wound repair remains unknown. Here we show that Amphiregulin functioned by releasing bioactive transforming growth factor beta (TGF-β) from latent complexes via integrin-α V activation. Using acute injury models in two different tissues, we found that by inducing TGF-β activation on mesenchymal stromal cells (pericytes), Amphiregulin induced their differentiation into myofibroblasts, thereby selectively contributing to the restoration of vascular barrier function within injured tissue. Furthermore, we identified macrophages as a critical source of Amphiregulin, revealing a direct effector mechanism by which these cells contribute to tissue restoration after acute injury. Combined, these observations expose a so far under-appreciated mechanism of how cells of the immune system selectively control the differentiation of tissue progenitor cells during tissue repair and inflammation.