Hepatocyte spheroids microencapsulated in hydrogels can contribute to liver research in various capacities. The conventional approach of microencapsulating spheroids produces a variable number of spheroids per microgel and requires an extra step of spheroid loading into the gel. Here, a microfluidics technology bypassing the step of spheroid loading and controlling the spheroid characteristics is reported. Double-emulsion droplets are used to generate microencapsulated homotypic or heterotypic hepatocyte spheroids (all as single spheroids <200 µm in diameter) with enhanced functions in 4 h. The composition of the microgel is tunable as demonstrated by improved hepatocyte functions during 24 d culture (albumin secretion, urea secretion, and cytochrome P450 activity) when alginate-collagen composite hydrogel is used instead of alginate. Hepatocyte spheroids in alginate-collagen also perform better than hepatocytes cultured in collagen-sandwich configuration. Moreover, hepatocyte functions are significantly enhanced when hepatocytes and endothelial progenitor cells (used as a novel supporting cell source) are co-cultured to form composite spheroids at an optimal ratio of 5:1, which could be further boosted when encapsulated in alginate-collagen. This microencapsulated-spheroid formation technology with high yield, versatility, and uniformity is envisioned to be an enabling technology for liver tissue engineering as well as biomanufacturing.