How can a planarian regenerate its entire body from a small portion of its body? Neoblasts, the totipotent stem cells of planarian, are assumed to be able to produce all missing cell types. However, we do not know how the cell fate of these cells is controlled during regeneration. Our recent studies with molecular markers suggest that intercalary regeneration is the fundamental principle in planarian regeneration. Here, we introduce the intercalation induced by ectopic grafting along the anteroposterior (A-P), dorsoventral (D-V), and left–right (L-R) axes. Blastema formation is evoked by ectopic D-V interactions after wound closure. Intercalation between the blastema and stump induces rearrangement of the positional identities along the A-P axis. Consequently, totipotent stem cells change their differentiation patterns according to the newly rearranged positional identities along the A-P, D-V, and L-R axes. According to the classic view, the blastema is regarded as the place where undifferentiated cells accumulate and regenerative events occur. Here, we propose a new interpretation, i.e., that the blastema may work as a signaling center inducing intercalary regeneration. Also, the roles of molecules and genes involved in intercalary regeneration are discussed. Developmental Dynamics 226:308–316, 2003. © 2003 Wiley-Liss, Inc.