Mesenchymal stromal/stem cells (MSCs) are considered promising cellular therapeutics in the fields of tissue engineering and regenerative medicine. MSCs secrete high concentrations of immunomodulatory cytokines and growth factors, which exert paracrine effects on infiltrating immune and resident cells of the wound microenvironment that could favorably promote healing after acute injury. However, better spatial delivery and improved retention at the site of injury are two factors that could improve the clinical application of MSCs. In this study, we utilized thiol-ene Michael-type addition for rapid encapsulation of MSCs within a gelatin/poly(ethylene glycol) biomatrix; this biomatrix was also applied as a provisional dressing to full-thickness wounds in Sprague-Dawley rats. The three-way interaction of MSCs, gelatin/poly(ethylene glycol) biomatrices, and host immune cells and adjacent resident cells of the wound microenvironment favorably modulated wound progression and host response. In this model we observed attenuated immune cell infiltration, lack of foreign giant cell (FBGC) formation, accelerated wound closure and re-epithelialization, as well as enhanced neovascularization and granulation tissue formation by 7 days. The MSC-entrapped gelatin/poly(ethylene glycol) biomatrix localized the presentation of MSCs adjacent to the wound microenvironment and thus, mediated early resolution of inflammatory events and facilitated proliferative phases in wound healing.