This work investigated the effects of cellular encapsulation density and differentiation stage on the osteogenic capacity of injectable, dual physically and chemically gelling hydrogels comprised of thermogelling macromers and polyamidoamine crosslinkers. Undifferentiated and osteogenically predifferentiated mesenchymal stem cells (MSCs) were encapsulated within 20 wt% composite hydrogels with gelatin microparticles at densities of six or 15 million cells/mL. We hypothesized that a high encapsulation density and predifferentiation would promote increased cellular interaction and accelerate osteogenesis, leading to enhanced osteogenic potential in vitro. Hydrogels were able to maintain the viability of the encapsulated cells over a period of 28 days, with the high encapsulation density and predifferentiation group possessing the highest DNA content at all time points. Early alkaline phosphatase activity and mineralization were promoted by encapsulation density, whereas this effect by predifferentiation was only observed in the low seeding density groups. Both parameters only demonstrated short-lived effects when examined independently, but jointly led to greater levels of alkaline phosphatase activity and mineralization. The combined effects suggest that there may be optimal encapsulation densities and differentiation periods that need to be investigated to improve MSCs for biomaterial-based therapeutics in bone tissue engineering.