In in-vivo bone tissue engineering, therapeutic efficacies are often unsatisfactory because the stem cells lose significant viability post-transplantation. The damaged cell may also present an unfavorable environment for cell growth. This means that cell transplantation would require the cells to be kept in a particular environment with substances that can support their survival, induce bioactivity, and enhance retention at the administered sites. This need drives the development of stem cells encapsulation in a biomaterial-based microcapsule. Our previous study has been conducted to encapsulate mesenchymal stem cells (MSC) in a feasible laboratory setting. It showed the survival of the MSC in the alginate system. However, higher throughput and uniform size of the encapsulated cells are needed. Therefore, this study introduces a Lab-on-a-chip setup to produce encapsulated stem cells as required quality. Here, an initial study on droplet generation was carried out using Computational Fluid Dynamics software. The study will use the volume of fluid methods with multiphase calculation taking oil as primary phase and water as a secondary phase. The CFD simulation shows that droplet size can be controlled at the range of 100-400 μm by varying the flow rate parameters. A comparative study also showed to confirm our result. This paper can be used for further studies in controllable droplet generation for stem cell encapsulation.