The threat that mechanical injury poses to homeostasis and survival has spurred the evolution of diverse processes to mitigate these effects. The most dramatic of these is regeneration, a process that restores the form and function of lost body parts. The apparent benefits of regeneration may come at considerable cost, however, and these may substantially diminish regeneration’s adaptive value in certain contexts, potentially contributing to evolutionary losses of regeneration. The costs and benefits of regeneration are poorly understood in most animals, precluding more than speculation of the evolutionary drivers of regeneration. Naids are a group of small, clonally reproducing freshwater annelids that feature great diversity of regenerative ability and are well suited to experimental studies. I used the species Pristina leidyi to determine how injury and regeneration affect organismal function and fitness, integrating physiological and molecular approaches. I first investigated how injury and regeneration differentially affect an individual’s ability to tolerate environmental stress, an ecologically relevant and energetically demanding task. I found that stress tolerance is reduced by regeneration in a stressor- and tissue-specific manner while, unexpectedly, tolerance is temporarily improved shortly after injury. These effects are unrelated to whole-organism metabolic rate, which surprisingly does not differ between early and late injury recovery. Using 3’ TagSeq, I found that, while injury and heat stress elicit largely distinct responses, both upregulate certain shared damage control pathways. I then tested whether the physiological cost of regeneration has potential to translate into fitness costs by examining the interaction between regeneration and reproduction, which occurs by asexual fission in this species. By modulating resource availability, I found evidence for an energetic trade-off between regeneration and reproduction that is masked when food is abundant. This tradeoff is manifested through a reduction in per-offspring allocation rather than reproductive rate. Overall, my results demonstrate that injury and regeneration costs are highly context dependent in P. leidyi. More broadly, these findings contrast in key ways from evolutionarily distant animals with very different life history traits, illustrating the importance of investigating the physiological mechanisms that may mediate selection on regeneration in diverse lineages.