This study describes the use of oligo [(polyethylene glycol) fumarate] (OPF) hydrogel scaffolds as vehicles for sustained delivery of dibutyryl cyclic adenosine monophosphate (dbcAMP) to the transected spinal cord. dbcAMP was encapsulated in poly(lactic-co-glycolic acid) (PLGA) microspheres, which were embedded within the scaffolds architecture. Functionality of the released dbcAMP was assessed using neurite outgrowth assays in PC12 cells and by delivery to the transected spinal cord within OPF seven channel scaffolds, which had been loaded with Schwann cells or mesenchymal stem cells (MSCs). Our results showed that encapsulation of dbcAMP in microspheres lead to prolonged release and continued functionality in vitro. These microspheres were then successfully incorporated into OPF scaffolds and implanted in the transected thoracic spinal cord. Sustained delivery of dbcAMP inhibited axonal regeneration in the presence of Schwann cells but rescued MSC-induced inhibition of axonal regeneration. dbcAMP was also shown to reduce capillary formation in the presence of MSCs, which was coupled with significant functional improvements. Our findings demonstrate the feasibility of incorporating PLGA microsphere technology for spinal cord transection studies. It represents a novel sustained delivery mechanism within the transected spinal cord and provides a platform for potential delivery of other therapeutic agents.