We report a highly biocompatible and practical protocol to create alginate microgels for bioactive encapsulation. Double-emulsion drops composed of dual cores enclosed by an ultrathin shell are prepared in a capillary microfluidic device, which exhibit selective coalescence between the cores. When the cores are laden with alginate precursors and divalent ions, respectively, coalescence leads to the formation of alginate microgels in the fused core of double-emulsion drops. The microgel can be rapidly released into a continuous water phase by rupturing the liquid shell. This method neither involves any toxic chemical cues for gelation nor long-term exposure to oil, thereby providing highly biocompatible encapsulation.