Osteoarthritis (OA) is an inflammatory joint disease that affects cartilage, subchondral bone, and joint tissues. Undifferentiated Mesenchymal Stromal Cells are a promising therapeutic option for OA due to their ability to release anti-inflammatory, immuno-modulatory, and pro-regenerative factors. They can be embedded in hydrogels to prevent their tissue engraftment and subsequent differentiation. In this study, human adipose stromal cells are successfully encapsulated in alginate microgels via a micromolding method. Microencapsulated cells retain their in vitro metabolic activity and bioactivity and can sense and respond to inflammatory stimuli, including synovial fluids from OA patients. After intra-articular injection in a rabbit model of post-traumatic OA, a single dose of microencapsulated human cells exhibit properties matching those of non-encapsulated cells. At 6 and 12 weeks post-injection, we evidenced a tendency toward a decreased OA severity, an increased expression of aggrecan, and a reduced expression of aggrecanase-generated catabolic neoepitope. Thus, these findings establish the feasibility, safety, and efficacy of injecting cells encapsulated in microgels, opening the door to a long-term follow-up in canine OA patients.