The mechanical aspects of the cellular microenvironment have been shown to play an important role in controlling adult stem cell self-renewal and differentiation. However not much has been studied with respect to the effects of these forces on embryonic stem cells (ESCs). Therefore, the development of technology that can be used to study the effects of mechanical forces on ESCs and embryoid bodies (EBs) will be of great importance in directing the differentiation of ESCs. Here we have used poly(ethylene glycol) (PEG) hydrogels to control the mechanical environment of ESCs since the mechanical and physical properties of PEG hydrogels can be controlled without providing biochemical signals to cells. We present a platform to encapsulate ESCs and EBs within PEG hydrogels of controlled geometries, mechanical, and diffusive properties such that the effects of diffusion and mechanics can be independently controlled. Furthermore we have performed preliminary analysis of the effects that these changes on the proliferation and differentiation of encapsulated mouse ESCs and EBs. It was found that cells can be encapsulated either as individual cells or cell aggregates within PEG hydrogels of various molecular weights, concentrations, and dimensions without losing viability for at least 7 days. Current experiments are underway to study the effects of these controlled microenvironments on ESC differentiation and proliferation.