PDGFRα⁺ mesenchymal progenitor cells are associated with pathological fibro-adipogenic processes. Conversely, a beneficial role for these cells during homeostasis or in response to revascularization and regeneration stimuli is suggested, but remains to be defined. We studied the molecular profile and function of PDGFRα⁺ cells in order to understand the mechanisms underlying their role in fibrosis versus regeneration. We show that PDGFRα⁺ cells are essential for tissue revascularization and restructuring through injury-stimulated remodeling of stromal and vascular components, context-dependent clonal expansion, and ultimate removal of pro-fibrotic PDGFRα⁺-derived cells. Tissue ischemia modulates the PDGFRα⁺ phenotype toward cells capable of remodeling the extracellular matrix and inducing cell-cell and cell-matrix adhesion, likely favoring tissue repair. Conversely, pathological healing occurs if PDGFRα⁺-derived cells persist as terminally differentiated mesenchymal cells. These studies support a context-dependent "yin-yang" biology of tissue-resident mesenchymal progenitor cells, which possess an innate ability to limit injury expansion while also promoting fibrosis in an unfavorable environment.