Summary The intestinal epithelium forms a barrier to the lumen and ensures uptake of vital nutrients. During inflammatory diseases, such as ulcerative colitis (UC), this barrier is compromised. Here, we perform single-cell RNA sequencing (scRNA-seq) of epithelial cells and outline patterns of cell fate decisions in healthy individuals and patients with UC. We demonstrate that lineage biased progenitors are major sources of normal tissue replenishment, and that patterns of cell behavior are profoundly altered in UC. We furthermore identify unique regenerative cell states linked to JAK/STAT activation extending into the non-inflamed areas of the colon. In organoid models, this can be mimicked by cytokine mediated activation of JAK/STAT leading to the emergence of cell populations with regenerative potential. These findings have profound implications for our understanding of tissue regeneration and illustrates how cytokine signaling influences cell fate decisions. This suggests widespread consequences in patients with chronic ulcerative conditions.