Repair of damaged tissue requires the coordinated action of inflammatory and tissue-specific cells to restore homeostasis, but the underlying regulatory mechanisms are poorly understood. In this paper, we report new roles for MKP-1 (mitogen-activated protein kinase [MAPK] phosphatase-1) in controlling macrophage phenotypic transitions necessary for appropriate muscle stem cell–dependent tissue repair. By restricting p38 MAPK activation, MKP-1 allows the early pro- to antiinflammatory macrophage transition and the later progression into a macrophage exhaustion-like state characterized by cytokine silencing, thereby permitting resolution of inflammation as tissue fully recovers. p38 hyperactivation in macrophages lacking MKP-1 induced the expression of microRNA-21 (miR-21), which in turn reduced PTEN (phosphatase and tensin homologue) levels, thereby extending AKT activation. In the absence of MKP-1, p38-induced AKT activity anticipated the acquisition of the antiinflammatory gene program and final cytokine silencing in macrophages, resulting in impaired tissue healing. Such defects were reversed by temporally controlled p38 inhibition. Conversely, miR-21–AKT interference altered homeostasis during tissue repair. This novel regulatory mechanism involving the appropriate balance of p38, MKP-1, miR-21, and AKT activities may have implications in chronic inflammatory degenerative diseases.