Advances in cell culture methods, multidisciplinary research, clinical need to replace lost skin tissues and regulatory need to replace animal models with alternative test methods has led to development of three dimensional models of human skin. In general, these in vitro models of skin consist of keratinocytes cultured over fibroblast-populated dermal matrices. Accumulating evidences indicate that mesenchyme-derived signals are essential for epidermal morphogenesis, homeostasis and differentiation. Various studies show that fibroblasts isolated from different tissues in the body are dynamic in nature and are morphologically and functionally heterogeneous subpopulations. Further, these differences seem to be dictated by the local biological and physical microenvironment the fibroblasts reside resulting in “positional identity or memory”. Furthermore, the heterogeneity among the fibroblasts play a critical role in scarless wound healing and complete restoration of native tissue architecture in fetus and oral mucosa; and excessive scar formation in diseased states like keloids and hypertrophic scars. In this review, we summarize current concepts about the heterogeneity among fibroblasts and their role in various wound healing environments. Further, we contemplate how the insights on fibroblast heterogeneity could be applied for the development of next generation organotypic skin models.