Advances in biomaterials, especially in hydrogels, have offered great opportunities for stem cell organoid engineering with higher controllability and fidelity. Here, we propose a novel strategy for one-step synthesis of composite hydrogel capsules (CHCs) that enable engineering liver organoids from human induced pluripotent stem cells (hiPSCs) in an oil-free droplet microfluidic system. The CHCs composed of a fibrin hydrogel core and an alginate-chitosan composite shell are synthesized by an enzymatic crosslinking reaction and electrostatic complexation within stable aqueous emulsions. The proposed CHCs exhibit high uniformity with biocompatibility, stability and high-throughput properties, as well as defined compositions. Moreover, the established system enables 3D culture, differentiation and self-organized formation of liver organoids in a continuous process by encapsulating hepatocyte-like cells derived from hiPSCs. The encapsulated liver organoids consisting of hepatocyte- and cholangiocyte-like cells show favorable cell viability and growth with consistent size. Furthermore, they maintain proper liver-specific functions including urea synthesis and albumin secretion, replicating the key features of the human liver. By combining stem cell biology, defined hydrogels and the droplet microfluidic technique, the proposed system is easy-to-operate, scalable and stable to engineer stem cell organoids, which may offer a robust platform to advance organoid research and translational applications.