Embryonic stem (ES) cells are of significant interest as a renewable source of therapeutically useful cells. ES cell aggregation is important for both human and mouse embryoid body (EB) formation and the subsequent generation of ES cell derivatives. Aggregation between EBs (agglomeration), however, inhibits cell growth and differentiation in stirred or high-cell-density static cultures. We demonstrate that the agglomeration of two EBs is initiated by E-cadherin-mediated cell attachment and followed by active cell migration. We report the development of a technology capable of controlling cell-cell interactions in scalable culture by the mass encapsulation of ES cells in size-specified agarose capsules. When placed in stirred-suspension bioreactors, encapsulated ES cells can be used to produce scalable quantities of hematopoietic progenitor cells in a controlled environment.