Functional tissue regeneration using synthetic biomaterials requires proliferation and heterotypic differentiation of stem/progenitor cells within a specialized heterogeneous (biophysical–biochemical) microenvironment. The current techniques have limitations to develop synthetic hydrogels, mimicking native extracellular matrix porosity along with heterogeneous microenvironmental cues of matrix mechanics, degradability, microstructure and cell–cell interactions. Here, we have developed a microenvironment modulating system to fabricate in situ porous hydrogel matrix with two or more distinct tailored microenvironmental niches within microbeads and the hydrogel matrix for multicellular tissue regeneration. Electrosprayed pectin-gelatin blended microbeads and crosslinked alginate hydrogel system help to tailor microenvironmental niches of encapsulated cells where two different cells are surrounded by a specific microenvironment. The effect of different microenvironmental parameters associated with the microbead/hydrogel matrix was evaluated using human umbilical-cord mesenchymal stem cells (hUCMSCs). The osteogenic differentiation of hUCMSCs in the hydrogel matrix was evaluated for bone tissue regeneration. This will be the first report on microenvironment modulating microbead-hydrogel system to encapsulate two/more types of cells in a hydrogel, where each cell is surrounded with distinct niches for heterogeneous tissue regeneration. Graphic abstract: [Figure not available: see fulltext.]. © 2021, Islamic Azad University.