Adipose-derived mesenchymal stem cells (ASCs) are appealing for cell-based wound therapies because of their accessibility and ease of harvest, but their utility is limited by poor cell survival within the harsh wound microenvironment. In prior work, our laboratory has demonstrated that seeding ASCs within a soft pullulancollagen hydrogel enhances ASC survival and improves wound healing. To more fully understand the mechanism of this therapy, we examined whether ASC-seeded hydrogels were able to modulate the recruitment and/ or functionality of endogenous progenitor cells. Employing a parabiosis model and fluorescence-activated cell sorting analysis, we demonstrate that application of ASC-seeded hydrogels to wounds, when compared with injected ASCs or a noncell control, increased the recruitment of provascular circulating bone marrow-derived mesenchymal progenitor cells (BM-MPCs). BM-MPCs comprised 23.0% of recruited circulating progenitor cells in wounds treated with ASC-seeded hydrogels versus 8.4% and 2.1% in those treated with controls, p < 0.05. Exploring the potential for functional modulation of BM-MPCs, we demonstrate a statistically significant increase in BM-MPC migration, proliferation, and tubulization when exposed to hydrogel-seeded ASCconditioned medium versus control ASC-conditioned medium (73.8% vs. 51.4% scratch assay closure; 9.1% vs. 1.4% proliferation rate; 10.2 vs. 5.5 tubules/HPF; p < 0.05 for all assays). BM-MPC expression of genes related to cell stemness and angiogenesis was also significantly increased following exposure to hydrogel-seeded ASCconditioned medium ( p < 0.05). These data suggest that ASC-seeded hydrogels improve both progenitor cell recruitment and functionality to effect greater neovascularization.