Co-culture strategies are foundational in cell biology. These systems, which serve as mimics of in vivo tissue niches, are typically poorly defined in terms of cell ratios, local cues and supportive cell-cell interactions. In the stem cell niche, the ability to screen cell-cell interactions and identify local supportive microenvironments has a broad range of applications in transplantation, tissue engineering and wound healing. We present a microfluidic platform for the high-throughput generation of hydrogel microbeads for cell co-culture. Encapsulation of different cell populations in microgels was achieved by introducing in a microfluidic device two streams of distinct cell suspensions, emulsifying the mixed suspension, and gelling the precursor droplets. The cellular composition in the microgels was controlled by varying the volumetric flow rates of the corresponding streams. We demonstrate one of the applications of the microfluidic method by co-encapsulating factor-dependent and responsive blood progenitor cell lines (MBA2 and M07e cells, respectively) at varying ratios, and show that in-bead paracrine secretion can modulate the viability of the factor dependent cells. Furthermore, we show the application of the method as a tool to screen the impact of specific growth factors on a primary human heterogeneous cell population. Co-encapsulation of IL-3 secreting MBA2 cells with umbilical cord blood cells revealed differential sub-population responsiveness to paracrine signals (CD14+ cells were particularly responsive to locally delivered IL-3). This microfluidic co-culture platform should enable high throughput screening of cell co-culture conditions, leading to new strategies to manipulate cell fate.