Amputation of the axolotl forelimb results in the formation of a blastema, a transient tissue where progenitor cells accumulate prior to limb regeneration. However, the molecular understanding of blastema formation had previously suffered from the inability to identify and isolate blastema precursor cells in the adult tissue. Here we use a combination of Cre-loxP reporter lineage tracking and single-cell (sc) RNA-seq to molecularly track mature connective tissue (CT) cell heterogeneity and its transition to a limb blastema state. We uncover a multi-phasic molecular program where CT cell types found in the uninjured adult limb revert to a relatively homogenous progenitor state that recapitulates an embryonic limb bud-like phenotype including multipotency within the CT lineage. Together, our data illuminates molecular and cellular reprogramming during complex organ regeneration in a vertebrate.