Macrophages undergo a transition from pro-inflammatory to healing-associated phenotypes that is critical for efficient wound healing. However, the regulation of this transition during normal and impaired healing remains to be elucidated. In our studies, the switch in macrophage phenotypes during skin wound healing was associated with upregulation of the peroxisome proliferator-activated receptor (PPAR)-γ and its downstream targets, along with increased mitochondrial content. In the setting of diabetes, upregulation of PPAR-γ activity was impaired by sustained expression of IL-1β in both mouse and human wounds. In addition, experiments with myeloid-specific PPAR-γ knockout mice indicated that loss of PPAR-γ in macrophages is sufficient to prolong wound inflammation and delay healing. Furthermore, PPAR-γ agonists promoted a healing-associated macrophage phenotype both in vitro and in vivo, even in the diabetic wound environment. Importantly, topical administration of PPAR-γ agonists improved healing in diabetic mice, suggesting an appealing strategy for downregulating inflammation and improving healing of chronic wounds.