Designing cell-compatible, bio-degradable, and stimuli-responsive hydrogels is very important for biomedical applications in cellular delivery and micro-scale tissue engineering. Here, we report achieving flexible control of cellular microencapsulation, permeability, and release by rationally designing a diblock copolymer, alginate-conjugated poly(N-isopropylacrylamide) (Alg-co-PNiPAM). We use the microfluidic technique to fabricate the bifunctional copolymers into thousands of mono-disperse droplet-templated hydrogel microparticles for controlled encapsulation and triggered release of mammalian cells. In particular, the grafting PNiPAM groups in the synthetic cell-laden microgels produce lots of nano-aggregates into hydrogel networks at elevated temperature, thereafter enhancing the permeability of microparticle scaffolds. Importantly, the hydrogel scaffolds are readily fabricated via on-chip quick gelation by triggered release of Ca2+ from the Ca-EDTA complex; it is also quite exciting that very mild release of microencapsulated cells is achieved via controlled degradation of hydrogel scaffolds through a simple strategy of competitive affinity of Ca2+ from the Ca-Alginate complex. This finding suggests that we are able to control cellular encapsulation and release through ion-induced gelation and degradation of the hydrogel scaffolds. Subsequently, we demonstrate a high viability of microencapsulated cells in the microgel scaffolds.