The central nervous system (CNS) has a low intrinsic potential for regeneration following injury and disease, yet neural stem/progenitor cell (NPC) transplants show promise to provide a dynamic therapeutic in this complex tissue environment. Moreover, biomaterial scaffolds may improve the success of NPC-based therapeutics by promoting cell viability and guiding cell response. We hypothesized that a hydrogel scaffold could provide a temporary neurogenic environment that supports cell survival during encapsulation, and degrades completely in a temporally controlled manner to allow progression of dynamic cellular processes such as neurite extension. We utilized PC12 cells as a model cell line with an inducible neuronal phenotype to define key properties of hydrolytically-degradable poly(ethylene glycol) hydrogel scaffolds that impact cell viability and differentiation following release from the degraded hydrogel. Adhesive peptide ligands (RGDS, IKVAV or YIGSR), were required to maintain cell viability during encapsulation; as compared to YIGSR, the RGDS and IKVAV ligands were associated with a higher percentage of PC12 cells that differentiated to the neuronal phenotype following release from the hydrogel. Moreover, among the hydrogel properties examined (e.g., ligand type, concentration), total polymer density within the hydrogel had the most prominent effect on cell viability, with densities above 15% w/v leading to decreased cell viability likely due to a higher shear modulus. Thus, by identifying key properties of degradable hydrogels that affect cell viability and differentiation following release from the hydrogel, we lay the foundation for application of this system towards future applications of the scaffold as a neural cell delivery vehicle.