We report a mild cell encapsulation method based on self-assembly and microfluidics technology. Xanthan gum, an anionic polysaccharide, was used to trigger the self-assembly of a positively charged multidomain peptide. The self-assembly resulted in the formation of a nanofibrous matrix and using a microfluidic device, microcapsules with homogeneous size were fabricated. The properties and performance of xanthan-peptide microcapsules were optimized by changing peptide/polysaccharide ratio and their effects on the microcapsule permeability and mechanical stability were analyzed. The effect of microcapsule formulation on viability and proliferation of encapsulated chondrocytic (ATDC5) cells was also investigated. The encapsulated cells were metabolically active, showing an increased viability and proliferation over 21 days of in vitro culture, demonstrating the long-term stability of the self-assembled microcapsules and their ability to support and enhance the survival of encapsulated cells over a prolonged time. Self-assembling materials combined with microfluidics demonstrated to be an innovative approach in the fabrication of cytocompatible matrix for cell microencapsulation and delivery.