Intestinal tumorigenesis can be initiated by dedifferentiation and the acquisition of stem-cell-like properties. This study demonstrates that NF-κB modulates Wnt signaling and that IEC-specific ablation of RelA/p65 retards crypt stem cell expansion. In contrast, elevated NF-κB signaling enhances Wnt activation and induces dedifferentiation of nonstem cells that acquire tumor-initiating capacity. These findings support the concept of bidirectional conversion and highlight the importance of inflammatory signaling for dedifferentiation and generation of tumor-initiating cells in vivo. The study used a genetic model of intestinal epithelial cell (IEC)-restricted constitutive Wnt-activation, which comprises the most common event in the initiation of colon cancer. The results show that NF-κB can enhance Wnt-signaling leading to the dedifferentiation of epithelial non-stem cells into tumor-initiating cells. The study also shows that NF-κB directly interacts with β-catenin and modulates β-catenin binding activity. Loss of Ikba accelerates crypt transformation and suggests dedifferentiation of IEC in β-catc.a. mice. Villus cells can dedifferentiate ex vivo and form spheroids that have the capacity to form tumors. The study provides direct genetic evidence that dedifferentiation can lead to the formation of tumor-initiating cells, questioning a strict unidirectional model of the stem-differentiation hierarchy but rather lending support to a model of bidirectional interconvertibility. The study also shows that oncogenic K-ras cooperates with Wnt signaling to dedifferentiate villus cells into intestinal tumor stem cells in a NF-κB dependent manner. The findings suggest that chronic inflammation may increase the number of potentially tumor-initiating cells by dedifferentiation, thus providing an additional explanation of why such patients have an elevated risk of developing colon cancer. The study also highlights the importance of NF-κB in tumor initiation and epithelial tumor stem cell function.Intestinal tumorigenesis can be initiated by dedifferentiation and the acquisition of stem-cell-like properties. This study demonstrates that NF-κB modulates Wnt signaling and that IEC-specific ablation of RelA/p65 retards crypt stem cell expansion. In contrast, elevated NF-κB signaling enhances Wnt activation and induces dedifferentiation of nonstem cells that acquire tumor-initiating capacity. These findings support the concept of bidirectional conversion and highlight the importance of inflammatory signaling for dedifferentiation and generation of tumor-initiating cells in vivo. The study used a genetic model of intestinal epithelial cell (IEC)-restricted constitutive Wnt-activation, which comprises the most common event in the initiation of colon cancer. The results show that NF-κB can enhance Wnt-signaling leading to the dedifferentiation of epithelial non-stem cells into tumor-initiating cells. The study also shows that NF-κB directly interacts with β-catenin and modulates β-catenin binding activity. Loss of Ikba accelerates crypt transformation and suggests dedifferentiation of IEC in β-catc.a. mice. Villus cells can dedifferentiate ex vivo and form spheroids that have the capacity to form tumors. The study provides direct genetic evidence that dedifferentiation can lead to the formation of tumor-initiating cells, questioning a strict unidirectional model of the stem-differentiation hierarchy but rather lending support to a model of bidirectional interconvertibility. The study also shows that oncogenic K-ras cooperates with Wnt signaling to dedifferentiate villus cells into intestinal tumor stem cells in a NF-κB dependent manner. The findings suggest that chronic inflammation may increase the number of potentially tumor-initiating cells by dedifferentiation, thus providing an additional explanation of why such patients have an elevated risk of developing colon cancer. The study also highlights the importance of NF-κB in tumor initiation and epithelial tumor stem cell function.