In situ gelling, cell‐laden hydrogels hold promise for regenerating tissue lesions with irregular shapes located in complex and hard‐to‐reach anatomical sites. A notable example is the regeneration of neural tissue lost due to cerebral cavitation. However, hypoxia‐induced cell necrosis during the vascularization period imposes a significant challenge to the success of this approach. Oxygen‐releasing hydrogels have been developed to address this issue, but they suffer from fast oxygen release over a short period, limiting their efficacy. This study develops an in situ gelling hydrogel system based on silk fibroin (SF) and decellularized brain extracellular matrix (dECM) with sustained oxygen release and tunable gelation time. Calcium peroxide nanoparticles (CPO NPs) served as the oxygen generating material, which were encapsulated within SF microparticles before incorporation into the SF‐dECM hydrogel, aiming to regulate the oxygen release rate. The total CPO content of the hydrogels was only 2%–4% w/w. Characterization of hydrogels containing various SF concentrations (2%, 4% or 6% w/v) and microparticle loadings (10%, 15% or 20% w/w) demonstrated that SF concentration in the hydrogel matrix significantly affects the swelling, resorption rate and mechanical properties, while microparticle loading has a milder effect. On the other hand, microparticle loading strongly affected the oxygen release profile. High SF concentration in the hydrogel matrix (6% w/v) led to slow resorption rate and high stiffness, likely unsuitable for intended application. Low SF concentration (2% w/v), on the other hand, led to a high swelling ratio and a less sustained oxygen release. Among 4% w/v SF hydrogels, increased microparticle loading led to a slower resorption rate, increased stiffness and enhanced oxygen release. However, cell viability was reduced at 20% w/w microparticle loading, likely due to decreased cell attachment. The 4% w/v SF hydrogels containing 10% w/w SF‐CPO microparticles exhibited relatively low swelling ratio (12.8% ± 2.4%), appropriate resorption rate (70.16% ± 10.75% remaining weight after 28 days) and compressive modulus (36.9 ± 1.7 kPa) and sustained oxygen release for over 2 weeks. This sample also showed the highest viability under hypoxic conditions among tested hydrogel samples (87.6% ± 15.9%). Overall, the developed hydrogels in this study showed promise for potential application in brain tissue engineering.