The wound dressings' lack of antioxidant and antibacterial properties, and delayed wound healing limit their use in wound treatment and management. Recent advances in dressing materials are aimed at improving the limitations discussed above. Therefore, the aim of this study includes the preparation and characterization of oxidized hydroxyethyl cellulose (OHEC) and ferulic acid-grafted chitosan (CS-FA) hydrogel loaded with green synthesized selenium nanoparticles (Se NPs) (OHEC-CS-FA-Se NPs named as nanohydrogel) for diabetic wound healing. The structure and properties of the hydrogel was characterized by FTIR, FE-SEM, HR-TEM, EDAX, UV–Vis spectrophotometry, XRD, DLS, zeta potential and rheological studies. The findings of these experiments demonstrate that nanohydrogel possesses a variety of outstanding qualities, including an optimal gel time, good swelling characteristics, a fair water retention rate, a good degradation rate, and strong mechanical stability. Nanohydrogel has been shown to have a synergistic impact by significantly increasing antioxidant activity by scavenging ABTS and DPPH radicals. The nanohydrogel's strong biocompatibility was confirmed by cytocompatibility testing using L929 mouse fibroblast cells. In addition, the wound healing potential of nanohydrogel was tested on L929 cells by an in vitro scratch assay and the nanohydrogel showed a wound closure rate of 100 % after 12 h. In addition to this study, nanohydrogel has demonstrated significant antimicrobial properties against human and wound infection causing pathogens such as Bacillus subtilis, methicillin-resistant Staphylococcus aureus (MRSA), Escherichia coli, and Pseudomonas aeruginosa. In the animal model, almost complete diabetic wound healing was achieved on day 14 after application of the nanohydrogel. The results obtained indicate that the multifunctional bioactive nature of OHEC-CS-FA-Se NPs showed exceptional antioxidant and antibacterial potential for the treatment of infected and chronic wounds.