Fibrocytes are a distinct population of blood-borne cells that display a unique cell surface phenotype (collagen I+/CD11b+/CD13+/CD34+/CD45RO+/MHC class II+/CD86+) and exhibit potent immunostimulatory activities. Circulating fibrocytes rapidly enter sites of tissue injury, suggesting an important role for these cells in wound repair. However, the regulatory processes that govern the differentiation of blood-borne fibrocytes and the mechanisms that underlie the migration of these cells to wound sites are currently not known. We report herein that ex vivo cultured fibrocytes can differentiate from a CD14+-enriched mononuclear cell population and that this process requires contact with T cells. Furthermore, we demonstrate that TGF-β1 (1–10 ng/ml), an important fibrogenic and growth-regulating cytokine involved in wound healing, increases the differentiation and functional activity of cultured fibrocytes. Because fibrocytes home to sites of tissue injury, we examined the role of chemokine/chemokine receptor interactions in fibrocyte trafficking. We show that secondary lymphoid chemokine, a ligand of the CCR7 chemokine receptor, acts as a potent stimulus for fibrocyte chemotaxis in vitro and for the homing of injected fibrocytes to sites of cutaneous tissue injury in vivo. Finally, we demonstrate that differentiated, cultured fibrocytes express α smooth muscle actin and contract collagen gels in vitro, two characteristic features of wound-healing myofibroblasts. These data provide important insight into the control of fibrocyte differentiation and trafficking during tissue repair and significantly expand their potential role during wound healing.