Tissue homeostasis relies on the ability of tissues to respond to stress. Tissue regeneration and tumour models in Drosophila have shown that JNK is a prominent stress-response pathway promoting injury-induced apoptosis and compensatory proliferation. A central question remaining unanswered is how both responses are balanced by activation of a single pathway. JAK/STAT signalling, a potential JNK target, is implicated in promoting compensatory proliferation. While we observe JAK/STAT activation in imaginal discs upon damage, our data demonstrates that JAK/STAT and its downstream effector Zfh2 promote survival of JNK-signalling cells instead. The JNK component fos and the pro-apoptotic gene hid are regulated in a JAK/STAT-dependent manner. This molecular pathway restrains JNK-induced apoptosis and spatial propagation of JNK-signalling, thereby limiting the extent of tissue damage, as well as facilitating systemic and proliferative responses to injury. We find that the pro-survival function of JAK/STAT also drives tumour growth under conditions of chronic stress. Our study defines JAK/STAT function in tissue stress and illustrates how crosstalk between conserved signalling pathways establishes an intricate equilibrium between proliferation, apoptosis and survival to restore tissue homeostasis.