In this work, we investigated the viability and osteogenic differentiation of mesenchymal stem cells encapsulated with gelatin microparticles (GMPs) in an injectable, chemically and thermally gelling hydrogel system combining poly(N-isopropylacrylamide)-based thermogelling macromers containing pendant epoxy rings with polyamidoamine-based hydrophilic and degradable diamine crosslinking macromers. Specifically, we studied how the parameters of GMP size and loading ratio affected the viability and differentiation of cells encapsulated within the hydrogel. We also examined the effects of cell and GMP co-encapsulation on hydrogel mineralization. Cells demonstrated long-term viability within the hydrogels, which was shown to depend on GMP size and loading ratio. In particular, increased interaction of cells and GMPs through greater available GMP surface area, use of an epoxy-based chemical gelation mechanism, and the tunable high water content of the thermogelled hydrogels led to favorable long-term cell viability. Compared with cellular hydrogels without GMPs, hydrogels co-encapsulating cells and GMPs demonstrated greater production of alkaline phosphatase by cells at all time-points and a transient early enhancement of hydrogel mineralization for larger GMPs at higher loading ratios. Such injectable, in situ forming hydrogels capable of delivering and maintaining populations of encapsulated mesenchymal stem cells and promoting mineralization in vitro offer promise as novel therapies for applications in tissue engineering and regenerative medicine.