Impaired skin regeneration in chronic wounds like in diabetes corresponds to high oxidative stress, poor angiogenesis and insufficient collagen hyperplasia. Therefore, a multifaceted strategy for treatment is required to address critical issues associated with chronic wound healing. Fascinating application of nanomaterials in chronic wounds is still limited; hence, in the present work bioactive solubilized decellularized dermal matrix (sADM) was employed to form a hydrogel with chitosan (CTS) at physiological pH/temperature and modified with reactive oxygen species (ROS) scavenging carbon nanodots (ND). A detailed in vitro investigation found that the ND modified bioactive hydrogel (CsADMND) is suitable for human amniotic membrane derived stem cell (hAMSC) delivery. Also, CsADMND was observed to possess a good ROS scavenging property, hemocompatibility and pro-angiogenic potential as demonstrated by 2,2-diphenyl-1-picrylhydrazyl (DPPH), haemolysis and chick chorioallantoic membrane (CAM) assay, respectively. The hybrid hydrogel promoted migration of cells in vitro in scratch assay owing to its antioxidant potential and the presence of bioactive moieties. Further, its efficacy in healing full thickness (FT) chronic wounds was evaluated in a streptozotocin (STZ) induced diabetic model. The CsADMND hydrogel after association with hAMSCs led to stimulation of early angiogenesis, superior collagen deposition, rapid wound closure, complete reepithelialisation, and formation of distinct organized dermal epidermal junctions (DEJ) post 21 days of healing. These results suggest that the hAMSC laden CsADMND hydrogel may serve as a promising therapeutic strategy for the management of chronic wounds.