The molecular mechanisms that maintain cellular identities and prevent dedifferentiation or transdifferentiation remain mysterious. However, both processes are transiently used during animal regeneration. Therefore, organisms that regenerate their organs, appendages, or even their whole body offer a fruitful paradigm to investigate the regulation of cell fate stability. Here, we used Hydra as a model system and show that Zic4, whose expression is controlled by Wnt3/β-catenin signaling and the Sp5 transcription factor, plays a key role in tentacle formation and tentacle maintenance. Reducing Zic4 expression suffices to induce transdifferentiation of tentacle epithelial cells into foot epithelial cells. This switch requires the reentry of tentacle battery cells into the cell cycle without cell division and is accompanied by degeneration of nematocytes embedded in these cells. These results indicate that maintenance of cell fate by a Wnt-controlled mechanism is a key process both during homeostasis and during regeneration.