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 growth 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 Drosophila tissues, the Caspase-9 homolog Dronc drives AiP via activation of Jun N-terminal kinase (JNK); however, the specific mechanisms of JNK activation remain unknown. Using a model of sustained AiP that produces a hyperplastic phenotype in Drosophila eye and head tissue, I have found that caspase-induced activation of JNK during AiP depends on extracellular reactive oxygen species (ROS) generated by the NADPH oxidase Duox. I found these ROS are produced early in the death-regeneration process by undifferentiated epithelial cells that have initiated the apoptotic cascade. I also found that reduction of these ROS by mis-expression of extracellular catalases was sufficient to reduce the frequency of overgrowth associated with our model of AiP. I further observed that extracellular ROS attract and activate Drosophila macrophages (hemocytes), which may in turn trigger JNK activity in epithelial cells by signaling through the TNF receptor Grindelwald. We propose that signaling back and forth between epithelial cells and hemocytes by extracellular ROS and Grindelwald drives compensatory proliferation within the epithelium, and that in cases of persistent signaling, such as in our sustained model of AiP, hemocytes play a tumor promoting role, driving overgrowth.