The treatment of refractory cutaneous wounds remains to be a clinical challenge. There is growing evidence to show that mesenchymal stem cells (MSCs) have great potential in promoting wound healing. However, the therapeutic effects of MSCs are greatly dampened by their poor survival and engraftment in the wounds. To address this limitation, in this study, MSCs were grown into a collagen-glycosaminoglycan (C-GAG) matrix to form a dermis-like tissue sheet, named engineered dermal substitute (EDS). When seeded on C-GAG matrix, MSCs adhered rapidly, migrated into the pores, and proliferated readily. When applied onto excisional wounds in healthy and diabetic mice, the EDS survived well, and accelerated wound closure, compared with C-GAG matrix alone or MSCs in collagen hydrogel. Histological analysis revealed that EDS prolonged the retention of MSCs in the wounds, associated with increased macrophage infiltration and enhanced angiogenesis. RNA-Seq analysis of EDS-treated wounds uncovered the expression of abundant human chemokines and proangiogenic factors and their corresponding murine receptors, suggesting a mechanism of ligand/receptor-mediated signals in wound healing. Thus, our results indicate that EDS prolongs the survival and retention of MSCs in the wounds and enhances wound healing.