Chronic kidney disease (CKD) is a major and growing public health concern with increasing incidence and prevalence worldwide. The therapeutic potential of stem cell therapy, including mesenchymal stem cells (MSCs) and endothelial progenitor cells (EPCs) holds great promise for treatment of CKD. However, there are significant bottlenecks in the clinical translation due to the reduced number of transplanted cells and the duration of their presence at the site of tissue damage. Bioengineered hydrogels may provide a route of cell delivery to enhance treatment efficacy and optimise the targeting effectiveness while minimising any loss of cell function. In this review, we highlight the advances in stem cell therapy targeting kidney disease and discuss the emerging role of hydrogel delivery systems to fully realise the potential of adult stem cells as a regenerative therapy for CKD in humans. MSCs and EPCs mediate kidney repair through distinct paracrine effects. As a delivery system, hydrogels can prolong these paracrine effects by improving retention at the site of injury and protecting the transplanted cells from the harsh inflammatory microenvironment. We also discuss the features of a hydrogel, which may be tuned to optimise the therapeutic potential of encapsulated stem cells, including cell-adhesive epitopes, material stiffness, nanotopography, modes of gelation and degradation and the inclusion of bioactive molecules. This review concludes with a discussion of the challenges to be met for the widespread clinical use of hydrogel delivery system of stem cell therapy for CKD.