Dressing materials involve conventional gauzes and modern materials such as hydrogels and foam‐based biomaterials. Although the choice of dressing material depends on the type of wound, a dressing material is expected to be non‐cytotoxic. Additionally, moist dressing is considered appropriate to accelerate epithelialisation, while dry dressing may cause tissue damage during removal. An ideal dressing material is expected to provide a moist environment and degrade and release the drug for faster wound healing. Thus, we have designed a hydrogel‐based biodegradable dressing material to provide the moist environment with no cytotoxic effect in vitro. The design of the hydrogel involved alginate–collagen reinforced with whisker cellulose derived from cotton. The hydrogel was prepared via amide linkage in the presence of 1‐ethyl‐(dimethylaminopropyl) carbodiimide (EDC) and N‐hydroxysulfosuccinimide (NHS), followed by divalent cationic cross‐linking of alginate and hydrogen bonding with cellulose. The high water retention capability of the hydrogel enables a moist environment to be maintained in the wounded area. The constituents of the hydrogel provided a microenvironment that was suitable for cell proliferation in the vicinity of the hydrogel but inhibited cell attachment on it. The MTT assay results indicated a higher fibroblast proliferation and viability in the presence of the hydrogel.