Alginate microcapsules containing epoxy resin were developed through electrospraying method and embedded into epoxy matrix to produce a capsule-based self-healing composite system. These formaldehyde free alginate/epoxy microcapsules were characterized via light microscope, field emission scanning electron microscope, fourier transform infrared spectroscopy and thermogravimetric analysis. Results showed that epoxy resin was successfully encapsulated within alginate matrix to form porous (multi-core) microcapsules with pore size ranged from 5–100 μm. The microcapsules had an average size of 320 ± 20 μm with decomposition temperature at 220 °C. The loading capacity of these capsules was estimated to be 79%. Under in situ healing test, impact specimens showed healing efficiency as high as 86% and the ability to heal up to 3 times due to the multi-core capsule structure and the high impact energy test that triggered the released of epoxy especially in the second and third healings. TDCB specimens showed one-time healing only with the highest healing efficiency of 76%. The single healing event was attributed by the constant crack propagation rate of TDCB fracture test. For the first time, a cost effective, environmentally benign and sustainable capsule-based self-healing system with multiple healing capabilities and high healing performance was developed.