The already differentiated organs in plants have a remarkable capacity to regenerate new individuals under culture conditions. Plant in vitro regeneration practically starts with the induction of a pluripotent cell mass, the callus, from detached organs on auxin-rich callus-inducing medium (CIM), which is generally required for subsequent regeneration of new bodies. Recent studies show that CIM-induced callus formation occurs from the pericycle or pericycle-like cells through a root developmental pathway, whereas the signals involved in governing callus-forming capacity of pericycle cells remain unknown. Here we report that very-long-chain fatty acids (VLCFAs) play a critical role in confining the pericycle competence for callus formation and thus the regeneration capacity of Arabidopsis. By genetic screening, we identified the callus formation-related 1 (cfr1) mutant, which bypasses the inhibition of callus-forming capacity in roots by solitary-root (slr/iaa14). We show that CFR1 encodes 3-ketoacyl-CoA synthase 1 (KCS1), which catalyzes a rate-limiting step of VLCFA biosynthesis. Our biochemical and genetic analyses demonstrate that VLCFAs restrict the pericycle competence for callus formation, at least in part, by regulating the transcription of Aberrant Lateral Root Formation 4 (ALF4). Moreover, we provide evidence that VLCFAs act as cell layer signals to mediate the pericycle competence for callus formation. Taken together, our results identify VLCFAs or their derivatives as the confining signals for mediating the pericycle competence for callus formation and thus the regeneration capacity of plant organs.