Intracerebral implantation of neural stem cells (NSCs) to treat stroke remains an inefficient process with <5% of injected cells being retained. To improve the retention and distribution of NSCs after a stroke, we investigated the utility of NSCs' encapsulation in polyethylene glycol (PEG) microspheres. We first characterized the impact of the physical properties of different syringes and needles, as well as ejection speed, upon delivery of microspheres to the stroke injured rat brain. A 20 G needle size at a 10 μL/min flow rate achieved the most efficient microsphere ejection. Secondly, we optimized the delivery vehicles for in vivo implantation of PEG microspheres. The suspension of microspheres in extracellular matrix (ECM) hydrogel showed superior retention and distribution in a cortical stroke caused by photothrombosis, as well as in a striatal and cortical cavity ensuing middle cerebral artery occlusion (MCAo). Thirdly, NSCs or NSCs + endothelial cells (ECs) encapsulated into biodegradable microspheres were implanted into a large stroke cavity. Cells in microspheres exhibited a high viability, survived freezing and transport. Implantation of 110 cells/microsphere suspended in ECM hydrogel produced a highly efficient delivery that resulted in the widespread distribution of NSCs in the tissue cavity and damaged peri-infarct tissues. Co-delivery of ECs enhanced the in vivo survival and distribution of ∼1.1 million NSCs. The delivery of NSCs and ECs can be dramatically improved using microsphere encapsulation combined with suspension in ECM hydrogel. These biomaterial innovations are essential to advance clinical efforts to improve the treatment of stroke using intracerebral cell therapy.