We have developed an integrated microfluidic material processing chip and demonstrated the rapid production of collagen microspheres encapsulating cells with high uniformity and cell viability. The chip integrated three material processing steps. Monodisperse microdroplets were generated at a microfluidic T junction between aqueous and mineral oil flows. The flow was heated immediately to 37 °C to initiate collagen fiber assembly within a gelation channel. Gelled microspheres were extracted from the mineral oil phase into cell culture media within an extraction chamber. Collagen gelation immediately after microdroplet generation significantly reduced coalescence among microdroplets that led to non-uniform microsphere production. The microfluidic extraction approach led to higher microsphere recovery and cell viability than when a conventional centrifugation extraction approach was employed. These results indicate that chip-based material processing is a promising approach for cell-ECM microenvironment generation for applications such as tissue engineering and stem cell delivery.