Diabetes is a systemic disease in which the body cannot regulate the amount of sugar, namely glucose, in the blood. High glucose toxicity has been implicated in the dysfunction of diabetic wound healing, following insufficient production (Type 1) or inadequate usage (Type 2) of insulin. Chronic non-healing diabetic wounds are one of the major complications of both types of diabetes, which are serious concerns for public health and can impact the life quality of patients significantly. In general, diabetic wounds are characterized by deficient chemokine production, an unusual inflammatory response, lack of angiogenesis and epithelialization, and dysfunction of fibroblasts. Increasing scientific evidence from available experimental studies on animal and cell models strongly associates impaired wound healing in diabetes with dysregulated fibroblast differentiation to myofibroblasts, interrupted myofibroblast activity, and inadequate extracellular matrix production. Myofibroblasts play an important role in tissue repair by producing and organizing extracellular matrix and subsequently promoting wound contraction. Based on these studies, hyperglycaemic conditions can interfere with cytokine signalling pathways (such as growth factor-β pathway) affecting fibroblast differentiation, alter fibroblast apoptosis, dysregulate dermal lipolysis, and enhance hypoxia damage, thus leading to damaged microenvironment for myofibroblast formation, inappropriate extracellular matrix modulation, and weakened wound contraction. In this review, we will focus on the current available studies on the impact of diabetes on fibroblast differentiation and myofibroblast function, as well as potential treatments related to the affected pathways.