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The ability to maintain functional hepatocytes has important implications for bioartificial liver development, cell-based therapies, drug screening, and tissue engineering. Several approaches can be used to restore hepatocyte function in vitro, including coating a culture substrate with extracellular matrix (ECM), encapsulating cells within biomimetic gels (Collagen- or Matrigel-based), or co-cultivation with other cells. This paper describes the use of bioactive heparin-based core-shell microcapsules to form and cultivate hepatocyte spheroids. These microcapsules are comprised of an aqueous core that facilitates hepatocyte aggregation into spheroids and a heparin hydrogel shell that binds and releases growth factors. We demonstrate that bioactive microcapsules retain and release endogenous signals thus enhancing the function of encapsulated hepatocytes. We also demonstrate that hepatic function may be further enhanced by loading exogenous hepatocyte growth factor (HGF) into microcapsules and inhibiting transforming growth factor (TGF)-β1 signaling. Overall, bioactive microcapsules described here represent a promising new strategy for the encapsulation and maintenance of primary hepatocytes and will be beneficial for liver tissue engineering, regenerative medicine, and drug testing applications., Competing Interests: The authors declare no competing financial interest., (© 2023 The Authors.)