Photodegradable hydrogels that allow 3D encapsulation of cells are important biomaterials to modulate cellular microenvironments with temporal and spatial resolution. Herein we report a photodegradable hydrogel formed by the self-assembly of short peptides modified with a novel phototrigger. The phototrigger is a biaryl-substituted tetrazole moiety that, upon mild light irradiation, undergoes rapid intramolecular photoclick ligation to form a highly fluorescent pyrazoline moiety. Short peptides linked with a tetrazole-containing moiety, Tet(I) or Tet(II), are able to self-assemble into hydrogels, among which the Tet(I)-GFF and Tet(II)-GFRGD gels show good mechanical strength and biocompatibility for 3D encapsulation and prolonged culture of live cells. The phototriggered tetrazole-to-pyrazoline transformation generates a highly fluorescent reporter and induces the disassembly of the hydrogel matrix by disturbing the balance between hydrophilic interaction and π-π stacking of the self-assembled system. Photomodulation of cellular microenvironments was demonstrated not only for the cells grown on top of the gel but also for stem cells encapsulated inside the hydrogels.