Polyion complex (PIC) gel of poly(Pro-Hyp-Gly) was successfully fabricated by simply mixing polyanion and polycation derivatives of poly(Pro-Hyp-Gly), a collagen-like polypeptide. The polyanion, succinylated poly(Pro-Hyp-Gly), and the polycation, arginylated poly(Pro-Hyp-Gly), contain carboxy (pK_a = 5.2) and guanidinium (pK_a = 12.4) groups, respectively. Mixing the polyanion and the polycation at physiological pH (pH = 7.4) resulted in PIC gel. The hydrogel formation was optimum at an equimolar ratio of carboxy to guanidinium groups, suggesting that ionic interaction is the main determinant for the hydrogel formation. The hydrogel was successfully used for simultaneous rat bone marrow stromal cell encapsulation. The encapsulated cells survived and proliferated within the hydrogel. In addition, the cells exhibited different morphology in the hydrogel compared with cells cultured on a tissue culture dish as a two-dimensional (2D) control. At day one, a round morphology and homogeneous single cell distribution were observed in the hydrogel. In contrast, the cells spread and formed a fibroblast-like morphology on the 2D control. After three days, the cells in the hydrogel maintained their morphology and some of them formed multicellular aggregates, which is similar to cell morphology in an in vivo microenvironment. These results suggest that the PIC gel of poly(Pro-Hyp-Gly) can serve as a cytocompatible three-dimensional scaffold for stem cell encapsulation, supporting their viability, proliferation, and in vivo-like behavior.