Transport of oxygen and nutrients to cells within engineered tissues remains one of the most significant challenges in tissue engineering. This challenge has led researchers to seek new strategies to engineer vascularized tissues. Co-cultures of endothelial cells and pericytes can be used to form microvascular networks in bioactive scaffolds, and these networks have been shown to be perfusable and capable of anastomosis with host vasculature. These co-cultures are prevalent in the literature; however, little investigation has been done into the combination of cell-formed microvasculature with parenchymal cells. In our work, we used a co-culture approach to grow microvascular networks in a biomimetic poly(ethylene glycol) (PEG) hydrogel, in the presence of functional hepatocytes. Through the simultaneous encapsulation of three cell types – endothelial cells, pericyte precursors, and hepatocytes – in our biomimetic PEG system, we successfully engineered vascularized hepatic tissue. These vascularized tissues exhibited two distinct benefits when compared to non-vascularized controls. First, incorporation of the vasculogenic cells led to significant improvements in hallmark hepatocyte functions. Hepatocytes encapsulated alongside the vasculogenic cells demonstrated improved albumin synthesis and cytochrome P450 enzyme activity. These improvements result from physical and chemical cues from non-parenchymal cells, which regulate hepatocyte function in vivo and in vitro. Second, the cell-formed microvasculature led to improved mass transport within the hydrogel. In a microfluidic culture system designed to investigate the functionality of the cell-formed microvasculature, we demonstrated that the cell-formed networks are capable of anastomosis with prefabricated channels within the device. Further, transport through these networks significantly increased the distance from a media channel over which hepatocyte viability was supported. Our results suggest that a combination of prefabricated conduits and cell-formed microvasculature may be influential in the scaling up of engineered tissues.