The construction of biomimetic microenvironments with specific chemical and physical cues for the organization and modulation of a variety of cell populations is of key importance in tissue engineering. We show that a range of human cell types, including promyoblasts, chondrocytes, adipocytes, adenovirally transduced osteoprogenitors, immunoselected mesenchymal stem cells, and the osteogenic factor, rhBMP-2 (BMP: bone morphogenic protein), can be successfully encapsulated within mineralized polysaccharide capsules without loss of function in vivo. By controlling the extent of mineralization within the alginate/chitosan shell membrane, degradation of the shell wall and release of cells or rhBMP-2 into the surrounding medium can be regulated. In addition, we describe for the first time the ability to generate bead-in-bead capsules consisting of spatially separated cell populations and temporally separated biomolecule release, entrapped within alginate/chitosan shells of variable thickness, mineralization, and stability. Such materials offer significant potential as multifunctional scaffolds and delivery vehicles in tissue regeneration of hard and soft tissues.