Microgels are emerging as an outstanding platform for tissue regeneration because they overcome issues associated with conventional bulk/macroscopic hydrogels such as limited cell-cell contact and cell communication and low diffusion rates. Owing to the enhanced mass transfer and injectability via a minimally invasive procedure, these microgels are becoming a promising approach for bone regeneration applications. Nevertheless, there still remains a huge gap between the understanding of how the hydrogel matrix composition can influence cell response and overall tissue formation when switching from bulk formats to microgel format, which is often neglected or rarely studied. Here, we fabricated polyethylene glycol-based microgels and bulk hydrogels incorporating gelatin and hyaluronic acid (HA), either individually or together, and assessed the impact of both hydrogel composition and format upon the osteogenic differentiation of encapsulated human bone marrow-derived mesenchymal stem cells (hBMSCs). Osteogenesis was significantly greater in microgels than bulk hydrogels for both gelatin alone (Gel) and gelatin HA composite (Gel:HA) hydrogels, as determined by the expression of Runt-related transcription factor (Runx2) and alkaline phosphatase (ALP) genes and mineral deposition. Interestingly, Gel and Gel:HA hydrogels behaved differently between bulk and microgel format. In bulk format, overall osteogenic outcomes were better in Gel:HA hydrogels, but in microgel format, while the level of osteogenic gene expression was equivalent between both compositions, the degree of mineralization was reduced in Gel:HA microgels. Investigation into the affinity of hydroxyapatite for the different matrix compositions indicated that the decreased mineralization of Gel:HA microgels was likely due to a low affinity of hydroxyapatite to bind to HA and support mineral deposition, which has a greater impact on microgels than bulk hydrogels. Together, these findings suggest that both hydrogel composition and format can determine the success of tissue formation and that there is a complex interplay of these two factors on both cell behavior and matrix deposition. This has important implications for tissue engineering, showing that hydrogel composition and geometry must be evaluated together when optimizing conditions for cell differentiation and tissue formation.