Wound healing is a natural process involving several signaling molecules and cell types over a significant period of time. Although current dressings help to protect the wound from debris or infection, they do little in accelerating the healing process. Insulin has been shown to stimulate the healing of damaged skin. We have developed an alginate sponge dressing (ASD) that forms a hydrogel capable of providing a moist and protective healing environment. By incorporating insulin-loaded poly(D,L-lactide-co-glycolide) (PLGA) microparticles into ASD, we successfully stabilized and released insulin for up to 21 days. Insulin release and water absorption and transfer through the ASD were influenced by altering the levels of poly(ethylene glycol) (PEG) in the dressing matrix. Bioactivity of released insulin can be maintained for at least 10 days, demonstrated using a human keratinocyte migration assay. Results showed that insulin-loaded PLGA microparticles, embedded within PEG-ASD, functioned as an effective long-term delivery platform for bioactive insulin.