Non-healing wounds in patients with diabetes are a concerning issue associated with amputation and a high mortality rate. These wounds are exacerbated by oxidative stress and microbial infections resulting from hyperglycemia. Therefore, advanced materials for repairing wound beds must be identified urgently. This paper introduces a topically applicable composite hydrogel with thermosensitive properties and presents the antibacterial and antioxidant activities in mice with diabetes-induced wounds. This composite is developed by combining poly N-isopropyl acrylamide (NIPAM)-copolymerized HEMIN (NIPAM-co-HEMIN) and amine-modified alginate (ALG-EDA) biomaterials, with Ag nanoparticles (AgNPs) incorporated into the system as an antibacterial agent. Results of antibacterial tests show that the p(NIPAM-co-HEMIN)/ALG-EDA/AgNP composite system is effective against E. coli and S. aureus. Additionally, the AgNP composite exhibits low cellular toxicity in NIH3T3 and CT-2A cell lines. The wounds in diabetic mice treated with the composite system healed in <12 days, and the composite system accelerated the healing process by increasing collagen synthesis. In conclusion, the biocomposite reported herein is highly promising for repairing diabetic skin wounds and treating infections caused by bacterial microbes.