Dermal wound healing is a complex process that involved inflammation leading to re-epithelialization, granulation tissue, and tissue remodeling. Previous studies from our laboratory have shown that polysaccharides isolated from fungus, Phellinus gilvus (PG) have various anti-inflammatory activities. In present study, we have assessed the effect of polysaccharides from PG on the dermal wound healing of polysaccharides from PG in streptozotocin-induced diabetic rat model. Six of 6-mm circular wounds were created with biopsy punch on the 4th day after induction of diabetes. After 24 hours, each test substance was applied to the wound twice a day for next 5 days. Circular wounds treated with PG showed significantly reduced wound contraction and complete reepithelialization, as compared to wounds of non-treated (p < 0.05). These results show that polysaccharides isolated from PG enhanced wound repair in diabetic impaired healing, and could be developed as a wound healing agent in such clinical settings.