Neoblasts are an abundant, heterogeneous population of adult stem cells (ASCs) that facilitate the maintenance of planarian tissues and organs, providing a powerful system to study ASC self-renewal and differentiation dynamics. It is unknown how the collective output of neoblasts transit through differentiation pathways to produce specific cell types. The planarian epidermis is a simple tissue that undergoes rapid turnover. We found that as epidermal progeny differentiate, they progress through multiple spatiotemporal transition states with distinct gene expression profiles. We also identified a conserved early growth response family transcription factor, egr-5, that is essential for epidermal differentiation. Disruption of epidermal integrity by egr-5 RNAi triggers a global stress response that induces the proliferation of neoblasts and the concomitant expansion of not only epidermal, but also multiple progenitor cell populations. Our results further establish the planarian epidermis as a novel paradigm to uncover the molecular mechanisms regulating ASC specification in vivo.