Cryopreserved human skin allografts (CHSAs) are used for the coverage of major burns when donor sites for autografts are insufficiently available and have clinically shown beneficial effects on chronic non‐healing wounds. However, the biologic mechanisms behind the regenerative properties of CHSA remain elusive. Furthermore, the impact of cryopreservation on the immunogenicity of CHSA has not been thoroughly investigated and raised concerns with regard to their clinical application. To investigate the importance and fate of living cells, we compared cryopreserved CHSA with human acellular dermal matrix (ADM) grafts in which living cells had been removed by chemical processing. Both grafts were subcutaneously implanted into C57BL/6 mice and explanted after 1, 3, 7, and 28 days (n = 5 per group). A sham surgery where no graft was implanted served as a control. Transmission electron microscopy (TEM) and flow cytometry were used to characterise the ultrastructure and cells within CHSA before implantation. Immunofluorescent staining of tissue sections was used to determine the immune reaction against the implanted grafts, the rate of apoptotic cells, and vascularisation as well as collagen content of the overlaying murine dermis. Digital quantification of collagen fibre alignment on tissue sections was used to quantify the degree of fibrosis within the murine dermis. A substantial population of live human cells with intact organelles was identified in CHSA prior to implantation. Subcutaneous pockets with implanted xenografts or ADMs healed without clinically apparent rejection and with a similar cellular immune response. CHSA implantation largely preserved the cellularity of the overlying murine dermis, whereas ADM was associated with a significantly higher rate of cellular apoptosis, identified by cleaved caspase‐3 staining, and a stronger dendritic cell infiltration of the murine dermis. CHSA was found to induce a local angiogenic response, leading to significantly more vascularisation of the murine dermis compared with ADM and sham surgery on day 7. By day 28, aggregate collagen‐1 content within the murine dermis was greater following CHSA implantation compared with ADM. Collagen fibre alignment of the murine dermis, correlating with the degree of fibrosis, was significantly greater in the ADM group, whereas CHSA maintained the characteristic basket weave pattern of the native murine dermis. Our data indicate that CHSAs promote angiogenesis and collagen‐1 production without eliciting a significant fibrotic response in a xenograft model. These findings may provide insight into the beneficial effects clinically observed after treatment of chronic wounds and burns with CHSA.