Stem cell therapy holds great potential for treating ischemic diseases. However, contemporary methods for local stem cell delivery suffer from poor cell survival/retention after injection. We developed a unique multiscale delivery system by encapsulating therapeutic agent-laden nanoparticles in alginate hydrogel microcapsules and further coentrapping the nano-in-micro capsules with stem cells in collagen hydrogel. The multiscale system exhibits significantly higher mechanical strength and stability than pure collagen hydrogel. Moreover, unlike nanoparticles, the nano-in-micro capsules do not move with surrounding body fluid and are not taken up by the cells. This allows a sustained and localized release of extracellular epidermal growth factor (EGF), a substance that could significantly enhance the proliferation of mesenchymal stem cells while maintaining their multilineage differentiation potential via binding with its receptors on the stem cell surface. As a result, the multiscale system significantly improves the stem cell survival at 8 days after implantation to ∼70% from ∼4-7% for the conventional system with nanoparticle-encapsulated EGF or free EGF in collagen hydrogel. After injecting into the ischemic limbs of mice, stem cells in the multiscale system facilitate tissue regeneration to effectively restore ∼100% blood perfusion in 4 weeks without evident side effects.