Microporous annealed particle (MAP) hydrogels are promising materials for delivering therapeutic cells. It has previously been shown that spreading and mechanosensing activation of human mesenchymal stem cells (hMSCs) incorporated in these materials can be modulated by tuning the modulus of the microgel particle building blocks. However, the effects of degradability and functionalization with different integrin-binding peptides on cellular responses has not been explored. In this work, RGDS functionalized and enzymatically degradable poly(ethylene glycol) (PEG) microgels were annealed into MAP hydrogels via thiol-ene click chemistry and photopolymerization. During cell-mediated degradation, the microgel surfaces were remodeled to wrinkles or ridges, but the scaffold integrity was maintained. Moreover, cell spreading, proliferation, and secretion of extracellular matrix proteins were significantly enhanced in faster matrix metalloproteinase degrading (KCGPQGIWGQCK) MAP hydrogels compared to non-degradable controls after 8 days of culture. We subsequently evaluated paracrine activity by hMSCs seeded in the MAP hydrogels functionalized with either RGDS or c(RRETAWA), which is specific for α5β1 integrins, and evaluated the interplay between degradability and integrin-mediated signaling. Importantly, c(RRETAWA) functionalization upregulated secretion of bone morphogenetic protein-2 overall and on a per cell basis, but this effect was critically dependent on microgel degradability. In contrast, RGDS functionalization led to higher overall vascular endothelial growth factor secretion in degradable scaffolds due to the high cell number. These results demonstrate that integrin-binding peptides can modulate hMSC behavior in PEG-based MAP hydrogels, but the results strongly depend on the susceptibility of the microgel building blocks to cell-mediated matrix remodeling. This relationship should be considered in future studies aiming to further develop these materials for stem cell delivery and tissue engineering applications. STATEMENT OF SIGNIFICANCE: Microporous annealed particle (MAP) hydrogels are attracting increasing interest for tissue repair and regeneration and have shown superior results compared to conventional hydrogels in multiple applications. Here, we studied the impact of MAP hydrogel degradability and functionalization with different integrin-binding peptides on human mesenchymal stem cells (hMSCs) that were incorporated during particle annealing. Degradability was found to improve cell growth, spreading, and extracellular matrix production regardless of the integrin-binding peptide. Moreover, in degradable MAP hydrogels the integrin-binding peptide c(RRETAWA) was found to increase osteogenic protein expression by hMSCs compared to RGDS-functionalized MAP hydrogels. These results have important implications for the development of a MAP hydrogel-based hMSC delivery system for bone tissue engineering.