The encapsulation of living mammalian cells within a semi-permeable hydrogel matrix is an attractive procedure for many biomedical and biotechnological applications, such as xenotransplantation, maintenance of stem cell phenotype and bioprinting of three-dimensional scaffolds for tissue engineering and regenerative medicine. In this review, we focus on naturally derived polymers that can form hydrogels under mild conditions and that are thus capable of entrapping cells within controlled volumes. Our emphasis will be on polysaccharides and proteins, including agarose, alginate, carrageenan, chitosan, gellan gum, hyaluronic acid, collagen, elastin, gelatin, fibrin and silk fibroin. We also discuss the technologies commonly employed to encapsulate cells in these hydrogels, with particular attention on microencapsulation.