Fibroblasts play a pivotal role in wound healing. However, the molecular mechanisms determining the reparative response of fibroblasts remain unknown. Here, we identify Notch1 signaling as a molecular determinant controlling the plasticity and function of fibroblasts in modulating wound healing and angiogenesis. The Notch pathway is activated in fibroblasts of diabetic wounds but not in normal skin and non-diabetic wounds. Consistently, wound healing in the FSP-1^+/−;ROSA^LSL-N1IC+/+ mouse, in which Notch1 is activated in fibroblasts, is delayed. Increased Notch1 activity in fibroblasts suppressed their growth, migration, and differentiation into myofibroblasts. Accordingly, significantly fewer myofibroblasts and less collagen were present in granulation tissues of the FSP-1^+/−;ROSA^LSL-N1IC+/+ mice, demonstrating that high Notch1 activity inhibits fibroblast differentiation. High Notch1 activity in fibroblasts diminished their role in modulating the angiogenic response. We also identified that IL-6 is a functional Notch1 target and involved in regulating angiogenesis. These findings suggest that Notch1 signaling determines the plasticity and function of fibroblasts in wound healing and angiogenesis, unveiling intracellular Notch1 signaling in fibroblasts as potential target for therapeutic intervention in diabetic wound healing.