A biomimetic hydrogel platform was designed to signal encapsulated cells using immobilized cell-cell communication cues, with a focus on enhancing the survival and function of encapsulated pancreatic β-cells to treat type 1 diabetes. When MIN6 cells, a pancreatic β-cell line, were encapsulated in poly(ethylene glycol) (PEG) hydrogels, their survival and glucose responsiveness to insulin were highly dependent on the cell-packing density. A minimum packing density of 10(7) cells/mL was necessary to maintain the survival of encapsulated β-cells without the addition of material functionalities (e.g., cell adhesion ligands). While single cell suspensions can improve diffusion-limited mass transfer, direct cell-cell interactions are limited. Thus, thiolated EphA5-Fc receptor and ephrinA5-Fc ligand were conjugated into PEG hydrogels via a thiol-acrylate photopolymerization to render an otherwise inert PEG hydrogel bioactive. The biomimetic hydrogels presented here can provide crucial cell-cell communication signals for dispersed β-cells and improve their survival and proliferation. Together with the cell-adhesive peptide RGDS, the immobilized fusion proteins (EphA5-Fc and ephrinA5-Fc) synergistically increased the survival of both MIN6 β-cells and dissociated islet cells, both at a very low cell-packing density (< 2 × 10(6) cells/mL). This unique gel platform demonstrates new strategies for tailoring biomimetic environments to enhance the encapsulation of cells that require cell-cell contact to survive and function.