This paper reports a monolithic, force-feedback MEMS (microelectomechanical systems) microgripper and its application to micro-scale compression testing of swollen hydrogel microcapsules at wet state during manipulation. The single-chip microgripper integrates an electrothermal microactuator and two capacitive force sensors, one for contact detection (force resolution: 38.5 nN) and the other for gripping force measurements (force resolution: 19.9 nN). With the capability of resolving gripping forces down to 19.9 nN and material deformations with a 20.5 nm resolution, the system quantified Young's modulus values and viscoelastic parameters of alginate microcapsules (15-25 microm), demonstrating an easy-to-operate, accurate compression testing technique for characterizing soft, micrometer-sized biomaterials.