Pluripotent stem cells (PSCs) can form any specialized cell type found in the body making them an excellent tool for regenerative medicine applications. Directed differentiation of PSCs into specific phenotypes can be accomplished by introducing specific chemical cues such as the small molecule retinoic acid (RA). Expressed in the developing nervous system, RA can induce differentiation of PSCs into neural phenotypes including neurons. In this study, we encapsulated all-trans RA within poly (ɛ-caprolactone) (PCL) microspheres to generate controlled morphogen release over 28 days. RA/PCL microspheres less than ~10 µm in diameter were readily incorporated within the interstitial sites of human induced pluripotent stem cell (hiPSC) aggregates. After 5 days of culture, the microspheres did not induce cytotoxic effects and the hiPSC aggregates containing microspheres showed a decrease in the pluripotency marker SSEA-4. After 7 days of culture on laminin surfaces, aggregates expressed the neuronal marker TUJ1 and displayed extended neurite outgrowth. This approach provides consistent RA delivery throughout the aggregate and could be an effective strategy for differentiating cells in vivo.Overall, our results demonstrate that it is possible to combine hiPSC aggregates with RA/PCL microspheres for neural tissue engineering applications.