During Drosophila metamorphosis, most larval cells die. Pupal and adult tissues form from imaginal cells, tissue-specific progenitors allocated in embryogenesis that remain quiescent during embryonic and larval life. Clonal analysis and fate mapping of single, identified cells show that tracheal system remodeling at metamorphosis involves a classical imaginal cell population and a population of differentiated, functional larval tracheal cells that reenter the cell cycle and regain developmental potency. In late larvae, both populations are activated and proliferate, spread over and replace old branches, and diversify into various stalk and coiled tracheolar cells under control of fibroblast growth factor signaling. Thus, Drosophila pupal/adult tissue progenitors can arise both by early allocation of multipotent cells and late return of differentiated cells to a multipotent state, even within a single tissue.