Thrombomodulin (TM) is a type-I transmembrane glycoprotein expressed on the surfaces of endothelial cells and epidermal keratinocytes. It is known to regulate blood coagulation, inflammation, and cell-cell adhesion. A recombinant TM, which contains an epidermal growth factor-like domain and serine/threonine-riches domain, has been demonstrated to stimulate cell proliferation and migration of keratinocytes and wound healing. In this study, we developed the biodegradable hydrogels and evaluated the efficacy of sustained release of rhTM from the hydrogel for the treatment of diabetic wounds. The hydrogels were composed of gelatin with or without hyaluronic acid, and fabricated by chemical cross-linking followed by lyophilization. Gelatin-based hydrogels had porous structure, good swelling property, and were biodegradable with characteristics of slow rhTM release in a short term. The once every-3-day rhTM-loaded hydrogel (with hyaluronic acid) markedly promoted wound healing and were superior to rhTM solution, once daily rhTM hydrogel (without hyaluronic acid), hydrogel controls, and once every-3-day rhEGF hydrogel treatment groups. The rhTM hydrogels enhanced granulation tissue formation, re-epithelialization, collagen deposition, and angiogenesis in wound repair. The once every-3-day rhTM hydrogel was stable and drug release was maintained up to 11-month of storage at 4 °C. The developed rhTM hydrogels could meet the needs for clinical practice, and may have future medical applications for wound care in diabetic patients.