Gelation in the presence of cells with minimum cytotoxicity is highly desirable for materials with applications in tissue engineering. Herein, the naturally occurring polysaccharide pullulan is functionalized with thiolactones that undergo ring-opening addition of amines. As a result, the modified pullulan can be cross-linked with diamines and/or amine-containing biological substrates enhancing the system's versatility (e.g., gelatin and cell-binding ligands GHK/GRGDS). Thiolactone degrees of substitution of 2.5 or 5.0 mol % are achieved, and respective hydrogels exhibit mesh sizes of 27.8 to 49.1 nm. Cell proliferation studies on chosen gels (G' ≅ 500 Pa, over 14 days) demonstrate that for normal human dermal fibroblasts (NHDFs), both gelatin and GRGDS equally support cell proliferation, while in the case of hepatocytes (HepG2), the presence of GRGDS and GHK improve cell proliferation 10-fold compared to gelatin. Cells remain viable and in one instance were successfully encapsulated by in situ gelation, altogether confirming the mild and biocompatible nature of this strategy to produce biogels using biologically active substrates as cross-linkers.