Encapsulation of cells in hydrogel particles has been demonstrated as an effective approach to deliver therapeutic agents. The properties of hydrogel particles, such as the chemical composition, size, porosity, and number of cells per particle, affect cellular functions and consequently play important roles for the cell-based drug delivery. Microfluidics has shown unparalleled advantages for the synthesis of polymer particles and been utilized to produce hydrogel particles with a well-defined size, shape and morphology. Most importantly, during the encapsulation process, microfluidics can control the number of cells per particle and the overall encapsulation efficiency. Therefore, microfluidics is becoming the powerful approach for cell microencapsulation and construction of cell-based drug delivery systems. In this article, I summarize and discuss microfluidic approaches that have been developed recently for the synthesis of hydrogel particles and encapsulation of cells. I will start by classifying different types of hydrogel material, including natural biopolymers and synthetic polymers that are used for cell encapsulation, and then focus on the current status and challenges of microfluidic-based approaches. Finally, applications of cell-containing hydrogel particles for cell-based drug delivery, particularly for cancer therapy, are discussed.