Protracted postsurgical inflammation leading to postoperative complications remains a persistent problem in urethral reconstruction. Nanofibers in the form of peptide amphiphiles expressing anti-inflammatory peptides (AIF-PA) have positively modulated local inflammatory responses. Urethroplasty is performed to repair 5 mm ventral urethral defects with: uncoated small intestinal submucosa (SIS); SIS dip-coated with AIF-PA1 (anti-inflammatory treatment), or SIS dip-coated with AIF-PA6 (control) on 12-week-old male Sprague Dawley rats (n = 6/group/timepoint). Animals are euthanized at 14 and 28 d postsurgery. Hematoxylin-eosin, Masson's Trichrome, and immunohistochemistry with primary antibodies against myeloperoxidase (MPO; neutrophils), CD68, CD86, CD206 (macrophages), and proinflammatory cytokines TNFα and IL-1β are performed. Complete urethral healing occurs in 3/6 uncoated SIS (50%), 2/6 SIS+AIF-PA6 (33.3%), and 5/6 SIS+AIF-PA1 (83.3%) animals at 14 d and all at 28 d. Application of AIF-PA1 to SIS substitution urethroplasty decreases MPO+ neutrophils, CD86+ M1 proinflammatory macrophages, TNFα, and IL-1β levels while concurrently increasing levels of CD206+ M2 proregenerative/anti-inflammatory macrophages at the anastomoses and the regenerated tissue at the wound bed (REGEN). AIF-PA1 treatment enhances the healing process, contributing to earlier, complete urethral healing, and increased angiogenesis. Further studies are needed to elucidate the specific mechanism of inflammatory response modulation on angiogenesis and overall urethral healing.