Recessive dystrophic epidermolysis bullosa (RDEB) is a rare, incurable blistering skin disease caused by biallelic mutations in type VII collagen (C7). Advancements in treatment of RDEB have come from harnessing the immunomodulatory potential of mesenchymal stem cells (MSCs). Although human bone marrow-derived MSC (BM-MSC) trials in RDEB demonstrate improvement in clinical severity, the mechanisms of MSC migration to and persistence in injured skin and their contributions to wound healing are not completely understood. A unique subset of MSCs expressing ATP-binding cassette subfamily member 5 (ABCB5) resides in the reticular dermis and exhibits similar immunomodulatory characteristics to BM-MSCs. Our work aimed to test the hypothesis that skin-derived ABCB5+ dermal MSCs (DSCs) possess superior skin homing ability compared to BM-MSCs in immunodeficient NOD-scid IL2rgamma^null (NSG) mice. Compared to BM-MSCs, peripherally injected ABCB5+ DSCs demonstrated superior homing and engraftment of wounds. Furthermore, ABCB5+ DSCs vs BM-MSCs cocultured with macrophages induced less anti-inflammatory interleukin-1 receptor antagonist (IL-1RA) production. RNA sequencing of ABCB5+ DSCs compared to BM-MSCs showed unique expression of major histocompatibility complex class II and Homeobox (Hox) genes, specifically HOXA3. Critical to inducing migration of endothelial and epithelial cells for wound repair, increased expression of HOXA3 may explain superior skin homing properties of ABCB5+ DSCs. Further discernment of the immunomodulatory mechanisms among MSC populations could have broader regenerative medicine implications beyond RDEB treatment.