Supramolecular microgel capsules based on polyethylene glycol (PEG) are a promising class of soft particulate scaffolds with tailored properties. An approach to fabricate such particles with exquisite control by droplet-based microfluidics is presented. Linear PEG precursor polymers that carry bipyridine moieties on both chain termini are gelled by complexation to iron(II) ions. To investigate the biocompatibility of the microgels, living mammalian cells are encapsulated within them. The microgel elasticity is controlled by using PEG precursors of different molecular weights at different concentrations and the influence of these parameters on the cell viabilities, which can be optimized to exceed 90% is studied. Reversion of the supramolecular polymer cross-linking allows the microcapsules to be degraded at mild conditions with no effect on the viability of the encapsulated and released cells.