Biosample encapsulation is a critical step in a wide range of biomedical and bioengineering applications. Aqueous two-phase system (ATPS) droplets have been recently introduced and showed a great promise to the biological separation and encapsulation due to their excellent biocompatibility. This study shows for the first time the passive generation of salt-based ATPS microdroplets and their biocompatibility test. We used two ATPS including polymer/polymer (polyethylene glycol (PEG)/dextran (DEX)) and polymer/salt (PEG/Magnesium sulfate) for droplet generation in a flow-focusing geometry. Droplet morphologies and monodispersity in both systems are studied. The PEG/salt system showed an excellent capability of uniform droplet formation with a wide range of sizes (20-60 μm) which makes it a suitable candidate for encapsulation of biological samples. Therefore, we examined the potential application of the PEG/salt system for encapsulating human umbilical vein endothelial cells (HUVECs). A cell viability test was conducted on MgSO4 solutions at various concentrations and our results showed an adequate cell survival. The findings of this research suggest that the polymer/salt ATPS could be a biocompatible all-aqueous platform for cell encapsulation.