Patients with the rare genetic disorder Hyaline Fibromatosis Syndrome (HFS) often succumb before 18 months of age due to severe diarrhea. As HFS is caused by loss-of-function mutations in the gene encoding capillary morphogenesis gene 2 (CMG2), these symptoms highlight a critical yet unexplored role for CMG2 in the gut. Here, we demonstrate that CMG2 knockout mice exhibit normal colon morphology and no signs of inflammation until the chemical induction of colitis. In these conditions, the colons of knockout mice do not regenerate despite previously experiencing similarly severe colitis, due to an inability to replenish their intestinal stem cell pool. Specifically, CMG2 knockout impairs the transition from fetal-like to Lgr5+ adult stem cells, which is associated with a defect in ß-catenin nuclear translocation. Based on our findings, we propose that CMG2 functions as a context-specific modulator of Wnt signaling, essential for replenishing the pool of intestinal stem cells following injury. This study provides new insights into the molecular mechanisms underlying lethal diarrhea in HFS and offers a broader understanding of fetal-like regenerative responses.