There is a critical clinical need to develop therapies for nonhealing diabetic foot ulcers. Topically applied mesenchymal stromal cells (MSCs) provide a novel treatment to augment diabetic wound healing. A central pathological factor in nonhealing diabetic ulcers is an impaired blood supply. It was hypothesized that topically applied allogeneic MSCs would improve wound healing by augmenting angiogenesis. Allogeneic nondiabetic bone-marrow derived MSCs were seeded in a collagen scaffold. The cells were applied to a full-thickness cutaneous wound in the alloxan-induced diabetic rabbit ear ulcer model in a dose escalation fashion. Percentage wound closure and angiogenesis at 1 week was assessed using wound tracings and stereology, respectively. The topical application of 1,000,000 MSCs on a collagen scaffold demonstrated increased percentage wound closure when compared with lower doses. The collagen and collagen seeded with MSCs treatments result in increased angiogenesis when compared with untreated wounds. An improvement in wound healing as assessed by percentage wound closure was observed only at the highest cell dose. This cell-based therapy provides a novel therapeutic strategy for increasing wound closure and augmenting angiogenesis, which is a central pathophysiological deficit in the nonhealing diabetic foot ulcer.