Introduction: Diabetic wounds are challenging to treat due to a wide range of pathophysiological changes. Hypoxia is one of the predominant contributing factors of poor vascularization and chronicity in diabetic wounds. This study was designed to develop polycaprolactone (PCL)-based oxygen-releasing electrospun wound dressings and evaluate their efficacy for improved full thickness wound healing in diabetic rats. Methods: PCL-based oxygen releasing wound dressings were made using electrospinning technology. The developed dressings were characterized in terms of physical as well as biological properties both in vitro and in vivo. E-spun nanofibrous dressings were physically characterized with scanning electron microscopy, Fourier-transform infrared spectroscopy, and Energy-dispersive X-ray spectroscopy. To study the likely impact of the fabricated wound dressings in hypoxic conditions, HIF-1α expression analysis was carried out both at gene and protein levels. Wound dressings were further evaluated for their healing potential for extensive wounds in diabetic rat models. Results: The experimental results showed that the developed dressings were capable of continuously generating oxygen for up to 10 days. Cell studies further confirmed pronounced expression of HIF-1α at gene and protein levels in cells seeded on PCL-sodium percarbonate (SPC) and PCL scaffolds compared with the cells cultured on a tissue culture plate. Chorioallantoic membrane assay revealed the supportive role of oxygen releasing dressings on angiogenesis compared to the control group. Histological assessment of the regenerated skin tissues proved that full thickness wounds covered with SPC loaded PCL dressings had a comparatively better vascularized and compact extracellular matrix with completely covered thick epithelium. Discussion: The developed oxygen generating polymeric nanofibrous wound dressings could potentially be used as an envisioned approach for the efficient recovery of chronic diabetic wounds. © 2020 Zehra et al.