We present a microfluidic device generating three-dimensional (3D) coaxial flow by the addition of a simple hillock to produce an alginate core-shell microcapsule for the efficient formation of a cell spheroid. A hillock tapered at downstream of the two-dimensional focusing channel enables outside flow to enclose the core flow. The aqueous solution in the core flow was focused and surrounded by 1.8% alginate solution to be solidified as a shell. The double-layered coaxial flow (aqueous phase) was broken up into a droplet by the shear flow of oleic acid (oil phase) containing calcium chloride for the polymerization of the alginate shell. The droplet generated from the laminar coaxial flow maintained a double-layer structure and gelation of the alginate solution made a core-shell microcapsule. The shell-thickness of the microcapsule was adjusted from 8–21 μm by the variation of two aqueous flow rates. The inner shape of the shell was almost spherical when the ratio of the water–glycol mixture in the core flow exceeded 20%. The microcapsule was used to form a spheroid of embryonic carcinoma cells (embryoid body; EB) by injecting a cell suspension into the core flow. The cells inside the microcapsule aggregated into an EB within 2 days and the EB formation rate was more than 80% with strong compaction. The microcapsule formed single spherical EBs without small satellite clusters or a bumpy shape as observed in solid microbeads. The microfluidic chip for encapsulation of cells could generate a number of EBs with high rate of EB formation when compared with the conventional hanging drop method. The core-shell microcapsule generated by 3D focusing in the microchannel was effective in forming large number of spherical cell clusters and the encapsulation of cells in the microcapsule is expected to be useful in the transplantation of islet cells or cancer stem cell enrichment.