Enormous advances in the development of skin substitutes have occurred in the past 3 decades. Major obstacles yet to be overcome in the quest for an optimal skin substitute include controlling scar formation, contraction and the loss of adnexal structures. Mesenchyme-derived signals are essential for epithelial proliferation, skin morphogenesis, homeostasis and differentiation. Having previously shown that fibroblasts differentiate along a lineage from highly proliferative progenitor fibroblasts with characteristic spindle-shaped appearance to differentiated postmitotic polygonal fibrocytes, we have now established that the different subsets of fibroblasts exert significantly different patterns of cytokine release and that the highest levels of keratinocyte growth factor and transforming growth factor-β₁ expression result from differentiated fibroblasts. Coculture studies with keratinocytes reveal that postmitotic fibroblasts stimulate keratinocyte proliferation to a greater extent than progenitor fibroblasts. Acellular and fibroblast-seeded dermal substitutes have been shown to improve scarring and contraction in animal studies, the latter substitutes yielding the most favorable results. Fibroblasts from different body sites display different functional properties which may affect their suitability for dermal substitutes. Future in vivo human studies in tissue-engineered dermal substitutes will likely focus on fibroblast-seeded lattices and the impact of fibroblast subpopulations and bone marrow-derived mesenchymal stem cells on dermal regeneration.