Chronic, non-healing skin wounds arising as a sequela of underlying disease are often difficult to treat clinically, susceptible to infection, and may severely reduce a patient’s quality of life. Tissue engineered constructs may be employed to aid in wound closure and skin regeneration, but no single skin substitute is currently capable of fully restoring normal skin structure and physiological function. One critical factor directing wound healing progression and the resulting functional outcome is the host inflammatory response. Circulating monocytes migrate to wound sites and differentiate into macrophages, which further polarize to pro- or anti-inflammatory phenotypes depending on microenvironmental properties including extracellular matrix composition and local cytokine gradients. In chronic wounds, polarization is predominantly pro-inflammatory, resulting in the secretion of cytokines that impede healing. Studies have identified stromal cell-derived factor-1 alpha (SDF-1α) as a potent chemokine that recruits mesenchymal stem cells (MSCs) and macrophages, modulating their phenotype to promote the secretion of anti-inflammatory cytokines. We endeavor to fabricate a tissue engineered hydrogel-based biomaterial that can sustain the release of SDF-1α to initiate pro-healing effects at chronic wound sites. In the first aim of this project, we develop and characterize a nanocomposite hydrogel system capable of releasing SDF-1α and exerting bioactive effects on MSCs. This demonstrates its capability to controllably release the chemokine over time at physiologically relevant levels. In the second aim, we study this hydrogel’s effects on macrophage migration and phenotype both in vitro as well as in vivo using wild type and diabetic murine models. We show that our material allows macrophages primarily of the anti-inflammatory phenotype to infiltrate wounded tissue, and subsequently demonstrate its ability to stimulate skin tissue formation and vascularization so as to improve the rate of healing. The findings described in this dissertation detail the successful development of a nanocomposite hydrogel delivery system for immunomodulatory and wound healing applications, which may support the future development of clinical wound dressings, skin substitutes, and other immune-informed strategies for tissue regeneration applications.