Substitution urethroplasty for the treatment of male stricture disease is often accompanied by subsequent tissue fibrosis and secondary stricture formation. Patients with pre-existing morbidities are often at increased risk of urethral stricture recurrence brought upon in-part by delayed vascularization accompanied by overactive inflammatory responses following surgery. Within the context of this study, we demonstrate the functional utility of a cell/scaffold composite graft comprised of human bone marrow-derived mesenchymal stem cells (MSC) combined with CD34+ hematopoietic stem/progenitor cells (HSPC) to modulate inflammation and wound healing in a rodent model of substitution urethroplasty. Composite grafts demonstrated potent anti-inflammatory effects with regards to tissue macrophage and neutrophil density following urethral tissue analyses. This was accompanied by a significant reduction in pro-inflammatory cytokines TNFα and IL-1β and further resulted in an earlier transition to tissue remodeling and maturation with a shift in collagen type III to I. Grafted animals demonstrated a progressive maturation and increase in vessel size compared to control animals. Overall, MSC/CD34+ HSPC composite grafts reduce inflammation, enhance an earlier transition to wound remodeling and maturation concurrently increasing neovascularization in the periurethral tissue. We demonstrate the feasibility and efficacy of a stem cell-seeded synthetic graft in a rodent substitution urethroplasty model.