Microfluidic encapsulation of cells/tissues in hydrogel microcapsules has attracted tremendous attention in the burgeoning field of cell-based medicine. However, when encapsulating rare cells and tissues (e.g., pancreatic islets and ovarian follicles), the majority of the resultant hydrogel microcapsules are empty and should be excluded from the sample. Furthermore, the cell-laden hydrogel microcapsules are usually suspended in an oil phase after microfluidic generation, while the microencapsulated cells require an aqueous phase for further culture/transplantation and long-term suspension in oil may compromise the cells/tissues. Thus, real-time on-chip selective extraction of cell-laden hydrogel microcapsules from oil into aqueous phase is crucial to the further use of the microencapsulated cells/tissues. Contemporary extraction methods either require labeling of cells for their identification along with an expensive detection system or have a low extraction purity (<≈30%). Here, a deep learning-enabled approach for label-free detection and selective extraction of cell-laden microcapsules with high efficiency of detection (≈100%) and extraction (≈97%), high purity of extraction (≈90%), and high cell viability (>95%) is reported. The utilization of deep learning to dynamically analyze images in real time for label-free detection and on-chip selective extraction of cell-laden hydrogel microcapsules is unique and may be valuable to advance the emerging cell-based medicine.