In vitro regeneration of plants from tissues such as leaf or root explants typically starts with auxin-induced formation of a pluripotent cell mass termed callus. This cellular reprogramming is essential for the subsequent regeneration of shoots or roots. However, whether or how lipid metabolism is involved in callus formation and thus plant regeneration remains largely unclear. Here, we report that phospholipid remodeling is critical for auxin-induced callus formation during the regeneration of Arabidopsis thaliana. We show that phospholipid metabolism changes dynamically during auxin-induced pluripotent callus formation, and that interfering with the phospholipid metabolic pathway enhances or dampens callus formation induced by auxin. We further demonstrate that the phospholipid metabolite phosphatidic acid (PA) inhibits callus formation by binding to auxin signaling repressors of the INDOLE-3-ACETIC ACID INDUCIBLE (IAA) family and enhancing their stability, thereby decreasing auxin signaling and the callus-forming program. Our findings reveal the molecular interplay between phospholipid metabolism and auxin signaling during plant regeneration and identify developmental programs that may participate in this process.