Cell‐based therapies involving the injection of adipose‐derived stem/stromal cells (ASCs) within rationally designed biomaterials are a promising approach for stimulating angiogenesis. With this focus, the current work explored the effects of incorporating integrin‐binding RGD or IKVAV peptides within in situ‐gelling N‐methacrylate glycol chitosan (MGC) hydrogels on the response of encapsulated human ASCs. Initial studies focused on hydrogel characterization to validate that the MGC, MGC‐RGD, and MGC‐IKVAV hydrogels had similar biomechanical properties. ASC viability following encapsulation and culture under 2% O2 was significantly impaired in the MGC‐IKVAV group relative to the MGC and MGC‐RGD groups. In contrast, sustained viability, along with enhanced cell spreading and metabolic activity were observed in the MGC‐RGD group. Investigation of angiogenic transcription suggested that the incorporation of the peptide groups did not substantially alter the pro‐angiogenic gene expression profile of the encapsulated ASCs after 7 days of culture under 2% O2. Consistent with the in vitro findings, preliminary in vivo characterization following subcutaneous implantation into NOD/SCID mice showed that ASC retention was enhanced in the MGC‐RGD hydrogels relative to the MGC‐IKVAV group at 14 days. Further, the encapsulated ASCs in the MGC and MGC‐RGD groups promoted murine CD31+ endothelial cell recruitment to the peri‐implant region. Overall, the results indicate that the MGC‐RGD and MGC hydrogels are promising platforms for ASC delivery, and suggest that strategies that support long‐term ASC viability can augment in vivo angiogenesis through paracrine mechanisms. © 2018 Wiley Periodicals, Inc. J Biomed Mater Res Part A: 107A: 571–585, 2019.