Tissue-engineered therapies for liver failure offer the potential to augment or replace whole organ transplantation; however, fabrication of hepatic tissue poses unique challenges largely stemming from the complexity of liver structure and function. In this study, we illustrate the utility of highly-tunable, photopolymerizable poly(ethylene glycol) (PEG) hydrogels for 3D encapsulation of hepatic cells and highlight a range of techniques important for examining hepatocellular function in this platform. Owing to our long-term interest in incorporating proliferative progenitor cell types (e.g. hepatoblasts, oval cells, or cells derived from embryonic stem cells) and maintaining the phenotype of differentiated cells, we explored the behavior of bipotential mouse embryonic liver (BMEL) cells as a model progenitor cell and mature, fully differentiated, primary hepatocytes in this biomaterial system. We demonstrated the importance of cell-cell and cell-matrix interactions in the survival and function of these cell types, and the capacity to influence encapsulated cell phenotypes through modulation of hydrogel characteristics or gene silencing. Additionally, we demonstrated imaging techniques critical for the in situ assessment of encapsulated hepatocyte function combined with the ability to control cellular organization and overall architecture through microscale patterning technologies. Further analysis of liver progenitor as well as mature hepatocyte processes within the versatile PEG hydrogel platform will aid in the development of tissue engineered implantable liver systems.