Effective healing following tissue injury is predicated on an intimate coordination between immune cells and structural cells, where recruited immune cells induce or repress structural cell proliferation and gene expression. Early after tissue injury, fibroblasts begin to transition to myofibroblasts to contract and close wounds. In pathologic conditions where wounds fail to heal (such as diabetes), fibroblasts do not increase myofibroblast gene expression; however the mechanisms that control this fibroblast transition, in normal or diabetic conditions are not defined. Our group has previously identified that epigenetic alterations can control these phenotypic switches in immune and structural cells. Here, using human wound scSeq and murine transgenic models, we examined the mechanisms that may regulate this transition in the setting of injury. First, we identified that dermal fibroblasts when treated with the pro-inflammatory cytokine TNFa, significantly repressed myofibroblast genes including acta2, tgln, myl9, cald1, fibronectin and periostin. To identify possible the epigenetic mechanisms downstream of TNFa that modulate fibroblast phenotype, we performed an unbiased epigenetic superarray on TNFa-stimulated dermal fibroblasts, where SETDB2 was significantly upregulated and was also confirmed by qPCR. SiRNA-mediated knockdown of Setdb2 in murine fibroblasts prevented TNFa-mediated repression of myofibroblast genes, suggesting regulation of this transition by Setdb2. Human scSeq identified increased Setdb2 associated with increased TNFa signaling in wound fibroblasts, suggesting an interaction of these pathways. Interestingly, we found increased TNFa in macrophages and SETDB2 in fibroblasts from human diabetic wound scSeq and a murine diabetic (DIO) model, suggesting this pathway may contribute to the decreased conversion of fibroblasts to myofibroblasts seen in non-healing diabetic wounds. This work identifies setdb2 as a TNFa-mediated regulator of fibroblast to myofibroblast transition in wound repair and may identify a new therapeutic target for impaired tissue regeneration.