New and more biologically relevant in vitro models are needed for use in drug development, regenerative medicine, and fundamental scientific investigation. While the importance of the extracellular microenvironment is clear, the ability to investigate the effects of physiologically relevant biophysical and biochemical factors is restricted in traditional cell culture platforms. Moreover, the versatility for multi-parameter manipulation, on a single platform, with the optical resolution to monitor the dynamics of individual cells or small population is lacking. Here we introduce a microfluidic platform for 3D cell culture in biologically derived or synthetic hydrogels with the capability to monitor cellular dynamics in response to changes in their microenvironment. Direct scaffold microinjection, was employed to incorporate 3D matrices into microfluidic devices. Our system geometry permits a unique window for studying directional migration, e.g. sprouting angiogenesis, since sprouts grow predominantly in the microscopic viewing plane. In this study, we demonstrate the ability to generate gradients (non-reactive solute), surface shear, interstitial flow, and image cells in situ. Three different capillary morphogenesis assays are demonstrated. Human adult dermal microvascular endothelial cells (HMVEC-ad) were maintained in culture for up to 7 days during which they formed open lumen-like structures which was confirmed with confocal microscopy and by perfusion with fluorescent microspheres. In the sprouting assay, time-lapse movies revealed cellular mechanisms and dynamics (filopodial projection/retraction, directional migration, cell division and lumen formation) during tip-cell invasion of underlying 3D matrix and subsequent lumen formation.