Tissue stem cells contribute to tissue regeneration and wound repair through cellular programs that can be hijacked by cancer cells. Here, we investigate such a phenomenon in skin, where during homeostasis, stem cells of the epidermis and hair follicle fuel their respective tissues. We find that breakdown of stem cell lineage confinement—granting privileges associated with both fates—is not only hallmark but also functional in cancer development. We show that lineage plasticity is critical in wound repair, where it operates transiently to redirect fates. Investigating mechanism, we discover that irrespective of cellular origin, lineage infidelity occurs in wounding when stress-responsive enhancers become activated and override homeostatic enhancers that govern lineage specificity. In cancer, stress-responsive transcription factor levels rise, causing lineage commanders to reach excess. When lineage and stress factors collaborate, they activate oncogenic enhancers that distinguish cancers from wounds.