A decline in stem cell function impairs tissue regeneration during ageing, but the role of the stem-cell-supporting niche in ageing is not well understood. The small intestine is maintained by actively cycling intestinal stem cells that are regulated by the Paneth cell niche1,2. Here we show that the regenerative potential of human and mouse intestinal epithelium diminishes with age owing to defects in both stem cells and their niche. The functional decline was caused by a decrease in stemness-maintaining Wnt signalling due to production of Notum, an extracellular Wnt inhibitor, in aged Paneth cells. Mechanistically, high activity of mammalian target of rapamycin complex 1 (mTORC1) in aged Paneth cells inhibits activity of peroxisome proliferator activated receptor α (PPAR-α)3, and lowered PPAR-α activity increased Notum expression. Genetic targeting of Notum or Wnt supplementation restored function of aged intestinal organoids. Moreover, pharmacological inhibition of Notum in mice enhanced the regenerative capacity of aged stem cells and promoted recovery from chemotherapy-induced damage. Our results reveal a role of the stem cell niche in ageing and demonstrate that targeting of Notum can promote regeneration of aged tissues.