Biological tissues possess intricate hierarchical structures that enable diverse cellular functions, which are critical for maintaining physiological processes. Mimicking these properties is central to advancing tissue engineering and regenerative medicine. Aqueous two-phase systems (ATPS)-derived microgel bioinks have emerged as a versatile platform, offering biocompatibility, mechanical tunability, and multifunctionality for bioprinting applications. Recent advancements, such as oxygen-releasing constructs and modular designs, have demonstrated the potential of ATPS-derived microgel bioinks to create tailored cellular microenvironments, addressing challenges like oxygen delivery and tissue-specific integration while replicating the complexities of native tissues. This review synthesizes these advancements, critically discussing key considerations, including material selection, physicochemical properties, mechanotransduction, and stress-relaxation behavior. Future directions include advancing multi-scale fabrication techniques, refining cell-material interactions, and addressing scalability challenges to bridge the gap between research and clinical application. By providing a comprehensive perspective on the state-of-the-art in ATPS-derived microgel bioinks, this review emphasizes their potential to transform bioprinting and tissue engineering.