The spontaneous formation of coacervate microdroplet-laden photo-crosslinked hydrogels derived from the simple mixing of oxidized, methacrylated alginate (OMA) and methacrylated gelatin (GelMA) enables simultaneous creation of drug-laden microdroplets and encapsulation of stem cells in photo-polymerized coacervate hydrogels under physiological conditions. This can be utilized as a novel platform for in situ formation of localized, sustained bioactive molecule delivery to encapsulate stem cells for therapeutic applications.