The atrophy and hypofunction of the adrenal cortex following long-term pharmacologic glucocorticoid therapy is a major health problem necessitating chronic glucocorticoid replacement that often prolongs the ultimate return of endogenous adrenocortical function. Underlying this functional recovery is anatomic regeneration, the cellular and molecular mechanisms of which are poorly understood. Investigating the lineage contribution of cortical Sonic hedgehog (Shh)+ progenitor cells and the SHH–responsive capsular Gli1+ cells to the regenerating adrenal cortex, we observed a spatially and temporally bimodal contribution of both cell types to adrenocortical regeneration following cessation of glucocorticoid treatment. First, an early repopulation of the cortex is defined by a marked delamination and expansion of capsular Gli1+ cells, recapitulating the establishment of the capsular-cortical homeostatic niche during embryonic development. This rapid repopulation is promptly cleared from the cortical compartment only to be supplanted by repopulating cortical cells derived from the resident long-term-retained zona glomerulosa Shh+ progenitors. Pharmacologic and genetic dissection of SHH signaling further defines an SHH-dependent activation of WNT signaling that supports regeneration of the cortex following long-term glucocorticoid therapy. We define the signaling and lineage relationships that underlie the regeneration process.