Chronic nonhealing wounds are debilitating and diminish one's quality of life, necessitating the development of improved strategies for effective treatment. Biomaterial- and cell-based therapies offer an alternative treatment compared to conventional wound care for regenerating damaged tissues. Cell-based approaches frequently utilize endothelial cells (ECs) to promote vascularization and mesenchymal stromal cells (MSCs) for their potent secretome that promotes host cell recruitment. Spheroids have improved therapeutic potential over monodisperse cells, while degradable scaffolds can influence cellular processes conducive to long-term tissue regeneration. However, the role of biomaterial degradation on the therapeutic potential of heterotypic EC-MSC spheroids for wound healing is largely unknown. We formed poly(ethylene) glycol (PEG) hydrogels with varying ratios of matrix metalloproteinase (MMP)-degradable and non-degradable crosslinkers to develop three distinct constructs - fully degradable, partially degradable, and non-degradable - and interrogate the influence of degradation rate on engineered cell carriers for wound healing. We found that the vulnerability to degradation was critical for cellular proliferation, while inhibition of degradation impaired spheroid metabolic activity. Higher concentrations of degradable crosslinker promoted robust cell spreading, outgrowth, and secretion of proangiogenic cytokines (i.e., VEGF, HGF) that are critical in wound healing. The degree of degradation dictated the unique secretory profile of spheroids. When applied to a clinically relevant full-thickness ex vivo skin model, degradable spheroid-loaded hydrogels restored stratification of the epidermal layer, confirming the efficacy of scaffolds to promote wound healing. These results highlight the importance of matrix remodeling and its essential role in the therapeutic potential of heterotypic spheroids.