Background: The biological activity and regenerative medicine of bone marrow mesenchymal stem cells (BMSCs) have been focal topics in the broad fields of diabetic wound repair. However, the molecular mechanisms are still largely elusive for other cellular processes that are regulated during BMSC treatment. Our previous studies have shown that hypoxia is not only a typical pathological phenomenon of wounds but also exerts a vital regulatory effect on cellular bioactivity. In this study, the beneficial effects of hypoxic BMSCs on the cellular behaviors of epidermal cells and diabetic wound healing were investigated. Method: The viability and secretion ability of hypoxic BMSCs were detected. The autophagy, proliferation and migration of HaCaT cells cultured with hypoxic BMSCs-derived conditioned medium were assessed by estimating the expression of autophagy-related proteins, MTS, EdU proliferation and scratch assays. And the role of the SMAD signaling pathway during hypoxic BMSC-evoked HaCaT cell autophagy was explored through a series of in vitro gain- and loss-of-function experiments. Finally, the therapeutic effects of hypoxic BMSCs were evaluated using full-thickness cutaneous diabetic wound model. Results: First, we demonstrated that hypoxic conditions intensify HIF-1 alpha-mediated TGF-beta 1 secretion by BMSCs. Then, the further data revealed that BMSC-derived TGF-beta 1 was responsible for the activation of epidermal cell autophagy, which contributed to the induction of epidermal cell proliferation and migration. Here, the SMAD signaling pathway was identified as downstream of BMSC-derived TGF-beta 1 to regulate HaCaT cell autophagy. Moreover, the administration of BMSCs to diabetic wounds increased epidermal autophagy and the rate of re-epithelialization, leading to accelerated healing, and these effects were significantly attenuated, accompanied by the downregulation of Smad2 phosphorylation levels due to TGF-beta 1 interference in BMSCs. Conclusion: In this report, we present evidence that uncovers a previously unidentified role of hypoxic BMSCs in regulating epidermal cell autophagy. The findings demonstrate that BMSC-based treatment by restoring epidermal cell autophagy could be an attractive therapeutic strategy for diabetic wounds and that the process is mediated by the HIF-1 alpha/TGF-beta 1/SMAD pathway.