Production of high-energy lipids by microalgae may provide a sustainable, renewable energy source that can help tackle climate change. However, microalgae engineered to produce more lipids usually grow slowly, leading to reduced overall yields. Unfortunately, tools that enable the selection of cells based on growth while maintaining high biomass production, such as well-plates, water-in-oil droplet emulsions, and nanowell arrays do not provide production-relevant environments that cells experience in scaled-up cultures (e.g. bioreactors or outdoor cultivation farms). As a result, strains that are developed in the lab often do not exhibit the same beneficial phenotypic behavior when transferred to industrial production. Here we introduce PicoShells, picoliter-scale porous hydrogel compartments, that can enable >100,000 individual cells to be compartmentalized, cultured in production-relevant environments, and selected based on growth and biomass accumulation traits using standard flow cytometers. PicoShells consist of a hollow inner cavity where cells are encapsulated, and a porous outer shell that allows for continuous solution exchange with the external environment so that nutrients, cell-communication factors, and cytotoxic cellular byproducts can transport freely in and out of the inner cavity. PicoShells can also be placed directly into shaking flasks, bioreactors, or other production-relevant environments. We experimentally demonstrate that Chlorella sp. and Saccharomyces cerevisiae grow to significantly larger colony sizes in PicoShells than in water-in-oil droplet emulsions (P < 0.05). We have also demonstrated that PicoShells containing faster biomass accumulating Chlorella clonal colonies can be selected using a fluorescence-activated cell sorter and re-grown. Using the PicoShell process, we select a Chlorella population that accumulates biomass 8% faster than does an un-selected population after a single selection cycle.