Trauma‐induced heterotopic ossification (HO) is a complex disorder after musculoskeletal injury and characterized by aberrant extraskeletal bone formation. Recent studies shed light on critical role of dysregulated osteogenic differentiation in aberrant bone formation. Krupel‐like factor 2 (KLF2) and peroxisome proliferator‐activated receptor gamma (PPARγ) are master adapter proteins that link cellular responses to osteogenesis; however, their roles and relationships in HO remain elusive. Using a murine burn/tenotomy model in vivo, we identified elevated KLF2 and reduced PPARγ levels in tendon stem/progenitor cells (TSPCs) during trauma‐induced HO formation. Both KLF2 inhibition and PPARγ promotion reduced mature HO, whereas the effects of PPARγ promotion were abolished by KLF2 overexpression. Additionally, mitochondrial dysfunction and reactive oxygen species (ROS) production also increased after burn/tenotomy, and improvements in mitochondrial function (ROS scavenger) could alleviate HO formation, but were abolished by KLF2 activation and PPARγ suppression by affecting redox balance. Furthermore, in vitro, we found increased KLF2 and decreased PPARγ levels in osteogenically induced TSPCs. Both KLF2 inhibition and PPARγ promotion relieved osteogenesis by improving mitochondrial function and maintaining redox balance, and effects of PPARγ promotion were abolished by KLF2 overexpression. Our findings suggest that KLF2/PPARγ axis exerts regulatory effects on trauma‐induced HO through modulation of mitochondrial dysfunction and ROS production in TSPCs by affecting redox balance. Targeting KLF2/PPARγ axis and mitochondrial dysfunction can represent attractive approaches to therapeutic intervention in trauma‐induced HO.