Emulsion-based generation of hydrogel particles has been widely explored for numerous applications in fields such as biomedical, food, and drug delivery. Water-in-water emulsion (w/w) is an organic solvent-free approach and exploits solely aqueous media to generate nano- or microparticles. This strategy is environment-friendly and favorable for biomedical applications where biocompatibility is the ultimate criterion. Hence, PEG-based microgels can be synthesized with desired size and functionality using w/w emulsion technique. To estimate the influence of emulsification parameters on size and stability of PEG-lipid microgels, optimizations using three independent input variables were carried out: (i) ultrasonication power, (ii) ultrasonication duration, and (iii) duration of light exposure. Physical immobilization of microgels on islet-organoids was achieved through hydrophobic interactions. Cell function and viability were assessed thoroughly after microgel immobilization. Microgel size is dependent on ultrasonication parameters and microgel stability is vastly determined by the duration of light exposure. Immobilization of microgels with 5 mM lipid moiety promoted coating of islet-organoids. Coated organoids retained their function and viability without significant adverse effects. This is important for understanding fundamental aspects of PEG-lipid microgels using w/w emulsion, useful for possible drug/gene delivery applications to increase treatment efficiency and ultimately lead to clinical translation of PEG microgels for biomedical applications.