Microcapsules fabricated by layer-by-layer self-assembly have unique physicochemical properties that make them attractive for drug delivery applications. This study chiefly investigated the biocompatibility of one of the most stable types of microcapsules, those composed of poly-(sodium 4-styrene sulfonate) [PSS] and poly-(allylamine hydrochloride) [PAH], with cells cultured on two-dimensional (2D) substrates and in three-dimensional (3D) matrices. C6 glioma and 3T3 fibroblast cell morphology was observed after 24h of co-culture with PSS/PAH microcapsules on a 2D substrate. Cells were also cultured with four other types of microcapsules, each composed of at least one naturally occurring polyelectrolyte. At microcapsule to cell ratios up to 100:1, it was found that PSS/PAH microcapsules do not affect number of viable cells more substantially than do the other microcapsules investigated. However, differences in number of viable cells were found as a function of microcapsule composition, and our results suggest particular biochemical interactions between cells and internalized microcapsules, rather than mechanical effects, are responsible for these differences. We then investigated the effects of PSS/PAH microcapsules on cells embedded in 3D collagen matrices, which more closely approximate the tumor environments in which microcapsules may be useful drug delivery agents. Matrix structure, cell invasion, and volumetric spheroid growth were investigated, and we show that these microcapsules have a negligible effect on cell invasion and tumor spheroid growth even at high concentration. Taken together, this work suggests that PSS/PAH microcapsules have sufficiently high biocompatibility with at least some cell lines for use as proof of principle drug delivery agents in in vitro studies.