For over two decades, the precise role of transforming growth factor-beta (TGF-beta) isoforms in scarless healing of mammalian fetal skin wounds has generated much interest. Although their exact role remains to be established, it has been suggested that high TGF-beta3 activity may correlate with a scarless phenotype. Previously, we showed that plasminogen activator inhibitor-1 (PAI-1), a known TGF-beta downstream molecule and marker of fibrosis, is also developmentally regulated during fetal skin development. In this study, the relationship between TGF-beta3 and PAI-1 was investigated using embryonic day 14.5 TGF-beta3 knockout (ko) mice. The results showed increased PAI-1 expression in the epidermis and dermis of ko mice, using an ex vivo limb-wounding study. Furthermore, increased PAI-1 expression and activity was seen in embryo extracts and conditioned media of ko dermal fibroblasts. When TGF-beta3 knockout fibroblasts were placed into three-dimensional collagen matrices, they were found to have decreased collagen gel contraction, suggesting altered cell-matrix interaction. These findings provide a further avenue for the interactive role of TGF-beta3 and PAI-1 during fetal scarless repair.