In vivo, multidomain peptide (MDP) hydrogels undergo rapid cell infiltration and elicit a mild inflammatory response which promotes angiogenesis. Over time, the nanofibers are degraded and a natural collagen-based extracellular matrix is produced remodeling the artificial material into natural tissue. These properties make MDPs particularly well suited for applications in regeneration. In this work, we test the regenerative potential of MDP hydrogels in a diabetic wound healing model. When applied to full-thickness dermal wounds in genetically diabetic mice, the MDP hydrogel resulted in significantly accelerated wound healing compared to a clinically used hydrogel, as well as a control buffer. Treatment with the MDP hydrogel resulted in wound closure in 14 days, formation of thick granulation tissue including dense vascularization, innervation, and hair follicle regeneration. This suggests the MDP hydrogel could be an attractive choice for treatment of wounds in diabetic patients.