Decentralized learning enables serverless training of deep neural networks (DNNs) in a distributed manner on multiple nodes. This allows for the use of large datasets, as well as the ability to train with a wide variety of data sources. However, one of the key challenges with decentralized learning is heterogeneity in the data distribution across the nodes. In this paper, we propose In-Distribution Knowledge Distillation (IDKD) to address the challenge of heterogeneous data distribution. The goal of IDKD is to homogenize the data distribution across the nodes. While such data homogenization can be achieved by exchanging data among the nodes sacrificing privacy, IDKD achieves the same objective using a common public dataset across nodes without breaking the privacy constraint. This public dataset is different from the training dataset and is used to distill the knowledge from each node and communicate it to its neighbors through the generated labels. With traditional knowledge distillation, the generalization of the distilled model is reduced because all the public dataset samples are used irrespective of their similarity to the local dataset. Thus, we introduce an Out-of-Distribution (OoD) detector at each node to label a subset of the public dataset that maps close to the local training data distribution. Finally, only labels corresponding to these subsets are exchanged among the nodes and with appropriate label averaging each node is finetuned on these data subsets along with its local data. Our experiments on multiple image classification datasets and graph topologies show that the proposed IDKD scheme is more effective than traditional knowledge distillation and achieves state-of-the-art generalization performance on heterogeneously distributed data with minimal communication overhead.