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Human and murine skin wounding commonly results in fibrotic scarring, but the murine wounding model wound-induced hair neogenesis (WIHN) can frequently result in a regenerative repair response. Here, we show in single-cell RNA sequencing comparisons of semi-regenerative and fibrotic WIHN wounds, increased expression of phagocytic/lysosomal genes in macrophages associated with predominance of fibrotic myofibroblasts in fibrotic wounds. Investigation revealed that macrophages in the late wound drive fibrosis by phagocytizing dermal Wnt inhibitor SFRP4 to establish persistent Wnt activity. In accordance, phagocytosis abrogation resulted in transient Wnt activity and a more regenerative healing. Phagocytosis of SFRP4 was integrin-mediated and dependent on the interaction of SFRP4 with the EDA splice variant of fibronectin. In the human skin condition hidradenitis suppurativa, phagocytosis of SFRP4 by macrophages correlated with fibrotic wound repair. These results reveal that macrophages can modulate a key signaling pathway via phagocytosis to alter the skin wound healing fate.