Droplet-based printing and microfluidic encapsulation technologies have rapidly advanced as core tools for generating microscale hydrogel constructs with high precision, tunability, and biomedical relevance. These systems, which include flow-focusing microfluidics, in-air jetting platforms, and multiphase droplet generators, enable the formation of monodisperse microgels capable of encapsulating cells, biomolecules, and therapeutic agents under controlled conditions. Hydrogels serve as the foundational material platform for these constructs, offering biocompatibility, tuneable mechanical properties, and the ability to mimic extracellular matrix characteristics, thereby supporting cell viability, nutrient diffusion, and therapeutic functionality. Despite their promise, challenges persist, particularly related to reproducibility, droplet stability, throughput, and variability in hydrogel formulations. Differences in polymer composition, crosslinking kinetics, and droplet-generation mechanisms influence microgel structure and performance, complicating standardization across studies. This systematic review synthesizes 33 studies published between 2020 and 2025 to examine the relationships among system design, process parameters, hydrogel formulation, and biomedical application outcomes. The analysis reveals major trends toward oil-free systems, stimuli-responsive hydrogels, deterministic single-cell encapsulation, and higher-throughput platforms with translational potential. Using a process–structure–function perspective, the review highlights how droplet physics and hydrogel chemistry interact with biological constraints to influence applications such as immunotherapy, organoid culture, cartilage repair, and drug delivery. Key gaps remain in standardization and reporting. Addressing these will require more consistent protocols, improved materials-by-design strategies, and better integration of data-driven optimization. Collectively, these insights outline practical directions for advancing droplet-based hydrogel encapsulation technologies toward more robust biomedical use. © 2026 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license. http://creativecommons.org/licenses/by/4.0/