Tissue repair and regeneration have long been a focus of research, with growing evidence highlighting the role played by immunomodulation. The repair of tissue cells can be significantly promoted through the localized immunomodulation of tissues. Hydrogels are increasingly used in this field due to their biocompatibility, versatility, and relative ease of fabrication. This Review highlights the critical role of inflammation and immune development in the complex process of tissue repair after injury, highlighting the dynamic interactions between immune cells that ultimately influence the outcome of tissue healing. We also summarize the precise functions of immune cells and their responses in various tissue injury scenarios, which are critical for harnessing the full potential of immunomodulatory strategies to promote tissue repair. We discuss recent advances in drug-carrying hydrogels, which offer promising avenues for tissue regeneration with precise control of the immune environment for constructive tissue repair. Further advances in our understanding of the mechanisms driving inflammation and immune cell behavior during tissue injury are expected to foster the development of increasingly effective hydrogel-based immunomodulatory strategies to promote tissue repair and regeneration.