Polymers or hydrogels containing modified cyclodextrin (CD) are highly useful in drug delivery applications as CD is a cytocompatible amphiphilic molecule that can complex with a variety of hydrophobic drugs. Here, we designed modular photo-click thiol-ene hydrogels from derivatives of βCD and poly(ethylene glycol) (PEG), including βCD-allylether (βCD-AE), βCD-thiol (βCD-SH), PEG-thiol (PEGSH), and PEG-norbornene (PEGNB). Two types of CD-PEG hybrid hydrogels were prepared using radical-mediated thiol-ene photo-click reactions. Specifically, thiol-allylether hydrogels were formed by reacting multi-arm PEGSH and βCD-AE, and thiol-norbornene hydrogels were formed by cross-linking βCD-SH and multi-arm PEGNB. We characterized the properties of these two types of thiol-ene hydrogels, including gelation kinetics, gel fractions, hydrolytic stability, and cytocompatibility. Compared with thiol-allylether hydrogels, thiol-norbornene photo-click reaction formed hydrogels with faster gelation kinetics at equivalent macromer contents. Using curcumin, an anti-inflammatory and anti-cancer hydrophobic molecule, we demonstrated that CD-crosslinked PEG-based hydrogels, when compared with pure PEG-based hydrogels, afforded higher drug loading efficiency and prolonged delivery in vitro. Cytocompatibility of these CD-crosslinked hydrogels were evaluated by in situ encapsulation of radical sensitive pancreatic MIN6 β-cells. All formulations and crosslinking conditions tested were cytocompatible for cell encapsulation. Furthermore, hydrogels crosslinked by βCD-SH showed enhanced cell proliferation and insulin secretion as compared to gels crosslinked by either dithiothreitol (DTT) or βCD-AE, suggesting the profound impact of both macromer compositions and gelation chemistry on cell fate in chemically crosslinked hydrogels.