Nerve injuries can be catastrophic as neurons in the adult human do not divide; therefore, neurons lost due to injury cannot be replaced by innate healing processes. Current therapeutic treatments to repair traumatic brain injury consist of rehabilitative, cellular and molecular therapies. However, these approaches target only some aspects of the injury and are not completely restorative. We propose a change in direction: to induce nerve regeneration, we focus on astrocytes, support cells in the central nervous system (CNS). We aim to harness immature astrocytes to recapitulate cues that were present in the developing brain but disrupted or lost in the adult brain injury environment. We characterized newborn mouse astrocytes in two conditions, traditional two-dimensional glass coverslips and three-dimensional (3D) hydrogels. We present quantitative data supporting that 3D culture is critical for sustaining the heterogeneity of astrocytes. We also report that fibroblast growth factor induced astrocytes encapsulated in 3D hydrogels can recapitulate developmental cues and modify the hydrogel into an environment essential for neurite outgrowth and guidance. This work is a major step towards understanding key parameters that guide astrocyte development and nerve regeneration and provides a foundation to design improved strategies for CNS injury and neurodegenerative disorders