Poly(ethylene glycol) (PEG) hydrogels were investigated as encapsulation matrices for osteoblasts to assess their applicability in promoting bone tissue engineering. Non-adhesive hydrogels were modified with adhesive Arg-Gly-Asp (RGD) peptide sequences to facilitate the adhesion, spreading, and, consequently, cytoskeletal organization of rat calvarial osteoblasts. When attached to hydrogel surfaces, the density and area of osteoblasts attached were dramatically different between modified and unmodified hydrogels. A concentration dependence of RGD groups was observed, with increased osteoblast attachment and spreading with higher RGD concentrations, and cytoskeleton organization was seen with only the highest peptide density. A majority of the osteoblasts survived the photoencapsulation process when gels were formed with 10% macromer, but a decrease in osteoblast viability of approximately 25% and 38% was seen after 1 day of in vitro culture when the macromer concentration was increased to 20 and 30wt%, respectively. There was no statistical difference in cell viability when peptides were added to the network. Finally, mineral deposits were seen in all hydrogels after 4 weeks of in vitro culture, but a significant increase in mineralization was observed upon introduction of adhesive peptides throughout the network.