Abstract: This invention provides a system to embed stem cells within three-dimensional (3D) hydrogel microenvironments consisting of naturally derived proteins, proteoglycans and/or polysaccharides. Pure matrices or combinations of materials can be used. The method involves suspending stem cells in solutions of the matrix components of interest, emulsifying these solutions in a hydrophobic phase, triggering gelation of the matrix components by changing the environmental conditions, and collection of the resulting hydrogel beads. The unique bead format of this invention has the advantage of allowing the use of small amounts of rare matrix proteins. Bead preparations can be concentrated into a paste for use as a cell delivery vehicle to damaged tissues, either directly after encapsulation or after a period of culture to promote stem cell differentiation.