Human umbilical cord mesenchymal stem cells (hUCMSCs) are inexhaustible and can be obtained without an invasive surgery. To date, there has been no report on seeding hUCMSCs in three-dimensional scaffolds for muscle tissue engineering. The objectives of this study were to (1) investigate hUCMSC seeding in a scaffold for muscle engineering and (2) develop a novel construct consisting of hUCMSC-encapsulating and fast-degradable microbeads inside a hydrogel matrix. The rationale was that the hydrogel matrix would maintain the defect volume, while the microbeads would degrade to release the cells and concomitantly create macropores in the matrix. hUCMSCs were encapsulated in alginate-fibrin microbeads, which were packed in an Arg-Gly-Asp (RGD)-modified alginate matrix (AM). This construct is referred to as hUCMSC-microbead-AM. The control consisted of the usual cell encapsulation in AM without microbeads (referred to as hUCMSC-AM). In the hUCMSC-AM construct, the hUCMSCs showed as round dots with no spreading at 1-14 days. In contrast, cells in the hUCMSC-microbead-AM construct had a healthy spreading and elongated morphology. The microbeads successfully degraded and released the cells at 8 days. Myogenic expressions for hUCMSC-microbead-AM were more than threefold those of hUCMSC-AM (p<0.05). Immunofluorescence for myogenic markers was much stronger for hUCMSC-microbead-AM than hUCMSC-AM. Muscle creatine kinase of hUCMSC-microbead-AM at 14 days was twofold that of hUCMSC-AM (p<0.05). In conclusion, hUCMSC encapsulation in novel fast-degradable microbeads inside a hydrogel matrix was investigated for muscle engineering. Compared to the usual method of seeding cells in a hydrogel matrix, hUCMSC-microbead-AM construct had greatly improved cell viability and myogenic differentiation, and hence, is promising to enhance muscle regeneration.