Corneal integrity and transparency are indispensable for good vision. Cornea homeostasis is entirely dependent upon corneal stem cells, which are required for complex wound-healing processes that restore corneal integrity following epithelial damage. Here, we found that leucine-rich repeats and immunoglobulin-like domains 1 (LRIG1) is highly expressed in the human holoclone-type corneal epithelial stem cell population and sporadically expressed in the basal cells of ocular-surface epithelium. In murine models, LRIG1 regulated corneal epithelial cell fate during wound repair. Deletion of Lrig1 resulted in impaired stem cell recruitment following injury and promoted a cell-fate switch from transparent epithelium to keratinized skin-like epidermis, which led to corneal blindness. In addition, we determined that LRIG1 is a negative regulator of the STAT3-dependent inflammatory pathway. Inhibition of STAT3 in corneas of Lrig1^–/– mice rescued pathological phenotypes and prevented corneal opacity. Additionally, transgenic mice that expressed a constitutively active form of STAT3 in the corneal epithelium had abnormal features, including corneal plaques and neovascularization similar to that found in Lrig1^–/– mice. Bone marrow chimera experiments indicated that LRIG1 also coordinates the function of bone marrow–derived inflammatory cells. Together, our data indicate that LRIG1 orchestrates corneal-tissue transparency and cell fate during repair, and identify LRIG1 as a key regulator of tissue homeostasis.