Apoptosis-induced proliferation (AiP) is a compensatory mechanism to maintain tissue size and morphology following unexpected cell loss during normal development, and may also be a contributing factor to cancer and drug resistance. In apoptotic cells, caspase-initiated signaling cascades lead to the downstream production of mitogenic factors and the proliferation of neighboring surviving cells. In epithelial cells of Drosophila imaginal discs, the Caspase-9 ortholog Dronc drives AiP via activation of Jun N-terminal kinase (JNK); however, the specific mechanisms of JNK activation remain unknown. Here we show that caspase-induced activation of JNK during AiP depends on an inflammatory response. This is mediated by extracellular reactive oxygen species (ROSs) generated by the NADPH oxidase Duox in epithelial disc cells. Extracellular ROSs activate Drosophila macrophages (hemocytes), which in turn trigger JNK activity in epithelial cells by signaling through the tumor necrosis factor (TNF) ortholog Eiger. We propose that in an immortalized ("undead") model of AiP, signaling back and forth between epithelial disc cells and hemocytes by extracellular ROSs and TNF/Eiger drives overgrowth of the disc epithelium. These data illustrate a bidirectional cell-cell communication pathway with implication for tissue repair, regeneration, and cancer.