For stem cell research, three-dimensional (3D) hydrogels are increasingly recognized as more physiological systems than two-dimensional culture plates due to bidirectional and 3D interaction of stem cells and surrounding matrix. Among various stem cells, mesenchymal stem cells (MSCs) are one of the most widely applied from bench to bedside. In 3D hydrogels, MSCs are allowed to actively remodel the surrounding matrix through proteolytic degradation and cell-exerted force, which highly resembles in vivo situation. Notably, factors affecting hydrogel modifiability including matrix viscoelasticity and matrix degradability have been found to regulate adhesion, morphology, and fate decision of MSCs. In addition, MSCs within 3D hydrogels have been found to employ multiple mechanotransduction mechanisms including not only the classic integrin-actomyosin cytoskeleton system but also ion channels, microtubule cytoskeleton, and self-secreted proteinaceous matrix. This review summarizes the effects of biophysical cues on MSCs differentiation in 3D hydrogels and underlying mechanobiology in a hope to update our readers' understanding of stem cell biology and guide tissue engineering.