The goal of this work was to develop a novel biomaterial to be used for either wound dressing or as a scaffold for tissue engineering. The biodegradable hydrogels were prepared through crosslinking of gelatin with transglutaminase (TGase) in an aqueous solution. We found that the concentrations of 5 wt% gelatin and 1 unit/ml TGase were optimum for the proliferation of NIH/3T3 fibroblasts. Then, we investigated whether the cell proliferation was enhanced by incorporation of cell adhesion factors into the gelatin hydrogels. Since vitronectin and fibronectin can bind with gelatin by the action of TGase, we added these cell adhesion proteins into the gelatin hydrogels. The hydrogels incorporating these cell adhesion proteins significantly enhanced cell proliferation compared with the gelatin hydrogels without these proteins (p<0.05). Two types of synthetic Arg-Gly-Asp (RGD) peptides, RGDLLQ and RGDLLG, were also added to the gelatin solution where RGDLLQ is a substrate of TGase by virtue of a glutamine (Q) residue with an epsilon-amino group and RGDLLG is not. These two RGD peptides enhanced cell proliferation, but RGDLLQ significantly enhanced the proliferation compared with RGDLLG (p<0.05). These results suggest that TGase-mediated incorporation of cell adhesion factors into gelatin matrices enhanced cell proliferation and this novel biomaterial is a potent tool for wound dressing or tissue engineering.