The controlled biofabrication of stable, aligned collagen hydrogels within microfluidic devices is critically important to the design of more physiologically accurate, longer-cultured on-chip models of tissue and organs. To address this goal, collagen-alginate microgels were formed in a microfluidic channel by calcium crosslinking of a flowing collagen-alginate solution through a cross-channel chitosan membrane spanning a pore allowing ion diffusion but not convection. The gels formed within seconds as isolated islands in a single channel, and their growth was self-limiting. Total gel thickness was controlled by altering the concentration of calcium and collagen-alginate flow rate to reach an equilibrium of calcium diffusion and solution convection at the gel boundary, for a desired thickness of 30–200 μm. Additionally, less calcium and higher flow produced greater compression of the gel, with regions farther from the pore compressing more. An aligned, stable collagen network was demonstrated by collagen birefringence, circumferential texture orientation, and little change in gel dimensions with de-chelation of calcium from alginate by prolonged flow of EDTA in the channel. Resultant gels were most stable and only slightly asymmetric when formed from solutions containing 8 mg ml−1 collagen. Diffusion of 4 kDa and 70 kDa fluorescently-labeled dextran indicated size-dependent diffusion across the gel, and accessibility of the construct to appropriately-sized bioactive molecules. This work demonstrates the physicochemical parameter control of collagen gel formation in microfluidic devices, with utility toward on-chip models of dense extracellular matrix invasion, cancer growth and drug delivery to cells within dense extracellular matrix bodies.