The fetus heals skin wounds without scar formation. Human fetal skin that is transplanted to a subcutaneous location on an adult athymic mouse and subsequently wounded heals without scar formation, whereas the same skin heals with scar formation when transplanted to a cutaneous location. In situ hybridization with species‐specific DNA probes and immunohistochemistry were performed to characterize the healing process of human fetal skin in these two locations. Species‐specific human and mouse DNA probes were constructed and used to probe graft wounds under high stringency in situ hybridization conditions. Immunostaining for species‐specific fibroblasts, macrophages, and neutrophils was also performed. We found that the cutaneous human fetal grafts healed with scar and showed an influx of mouse fibroblasts and macrophages. In contrast, subcutaneous human fetal grafts showed exclusively human fetal fibroblasts in the wound environment, an absence of inflammatory cells, and scar‐free repair. We conclude that the highly organized collagen deposition in scarless human fetal wound repair appears to be intrinsic to the human fetal fibroblasts and occurs in the absence of an adult‐like inflammatory response.