Stem cell based therapies employ engraftment or systemic administration methods for the delivery of stem cells into the target tissues to enhance their regenerative potential. However, majority of the stem cells were found to migrate away from the target site soon after the transplantation, which directly hinders their clinical efficacy, in particular while treating cartilage defects. Therefore, the present study was designed to explore the feasibility and efficacy of an alginate/polyacrylamide (Algi/PAAm) composite biomaterial in the form of cell-laden hydrogel beads as a suitable carrier system to be able to hold the stem cells at the target site and deliver them efficiently. Human bone marrow-derived mesenchymal stem cells (hBMSCs) have been used as a model cell. The beads prepared at an optimized concentration ratio were characterized to study their physicochemical properties. Furthermore, cell-encapsulated Algi/PAAm beads were evaluated for their biological properties. The result of this study has demonstrated that the Algi/PAAm beads with their optimal composition were able to maintain the viability of the encapsulated cells during the period of study, suggesting the cellular compatibility of the beads. Additionally, the encapsulated cells showed round morphology within the beads, in contrast to the 2D-cultured spindle-like shape of hBMSCs. Based on the experimental data obtained in this study, cell-laden Algi/PAAm beads may serve as a potential carrier system for stem cell delivery. © The Royal Society of Chemistry 2016.