In this study, we report that TIP39, a parathyroid hormone ligand family member that was recently identified to be expressed in the skin, can induce decorin expression and enhance wound repair. Topical treatment of mice with TIP39 accelerated wound repair, whereas TIP39-deficient mice had delayed repair that was associated with formation of abnormal collagen bundles. To study the potential mechanism responsible for the action of TIP39 in the dermis, fibroblasts were cultured in three-dimensional collagen gels, a process that results in enhanced decorin expression unless activated to differentiate to adipocytes, whereupon these cells reduce expression of several proteoglycans, including decorin. Small interfering RNA-mediated silencing of parathyroid hormone 2 receptor (PTH2R), the receptor for TIP39, suppressed the expression of extracellular matrix-related genes, including decorin, collagens, fibronectin, and matrix metalloproteases. Skin wounds in TIP39-/- mice had decreased decorin expression, and addition of TIP39 to cultured fibroblasts induced decorin and increased phosphorylation and nuclear translocation of CREB. Fibroblasts differentiated to adipocytes and treated with TIP39 also showed increased decorin and production of chondroitin sulfate. Furthermore, the skin of PTH2R-/- mice showed abnormal extracellular matrix structure, decreased decorin expression, and skin hardness. Thus, the TIP39-PTH2R system appears to be a previously unrecognized mechanism for regulation of extracellular matrix formation and wound repair.