Osteoarthritis (OA) is the most common form of joint disease affecting articular cartilage and peri-articular tissues. Traditional treatments are insufficient, as they are aimed at mitigating symptoms. Multipotent Stromal Cell (MSC) therapy has been proposed as a treatment capable of both preventing cartilage destruction and treating symptoms. While many studies have investigated MSCs for treating OA, therapeutic success is often inconsistent due to low MSC viability and retention in the joint. To address this, biomaterial-assisted delivery is of interest, particularly hydrogel microspheres, which can be easily injected into the joint. Microspheres composed of hyaluronic acid (HA) were created as MSC delivery vehicles. Microrheology measurements indicated that the microspheres had structural integrity alongside sufficient permeability. Additionally, encapsulated MSC viability was found to be above 70% over one week in culture. Gene expression analysis of MSC-identifying markers showed no change in CD29 levels, increased expression of CD44, and decreased expression of CD90 after one week of encapsulation. Analysis of chondrogenic markers showed increased expressions of aggrecan (ACAN) and SRY-box transcription factor 9 (SOX9), and decreased expression of osteogenic markers, runt-related transcription factor 2 (RUNX2), and alkaline phosphatase (ALPL). In vivo analysis revealed that HA microspheres remained in the joint for up to 6 weeks. Rats that had undergone destabilization of the medial meniscus and had overt OA were treated with empty HA microspheres, MSC-laden microspheres, MSCs alone, or a control vehicle. Pain measurements taken before and after the treatment illustrated temporarily decreased pain in groups treated with encapsulated cells. Finally, the histopathological scoring of each group illustrated significantly less OA damage in those treated with encapsulated cells compared to controls. Overall, these studies demonstrate the potential of using HA-based hydrogel microspheres to enhance the therapeutic efficacy of MSCs in treating OA.