While matrix stiffness regulates cell behavior on 2D substrates, recent studies using synthetic hydrogels have suggested that in 3D environments, cell behavior is primarily impacted by matrix degradability, independent of stiffness. However, these studies did not consider the potential impact of other confounding matrix parameters that typically covary with changes in stiffness, particularly, hydrogel swelling and hydrolytic stability, which may explain the previously observed distinctions in cell response in 2D versus 3D settings. To investigate how cells sense matrix stiffness in 3D environments, a nonswelling, hydrolytically stable, linearly elastic synthetic hydrogel model is developed in which matrix stiffness and degradability can be tuned independently. It is found that matrix degradability regulates cell spreading kinetics, while matrix stiffness dictates the final spread area once cells achieve equilibrium spreading. Importantly, the differentiation of human mesenchymal stromal cells toward adipocytes or osteoblasts is regulated by the spread state of progenitor cells upon initiating differentiation. These studies uncover matrix stiffness as a major regulator of cell function not just in 2D, but also in 3D environments, and identify matrix degradability as a critical microenvironmental feature in 3D that in conjunction with matrix stiffness dictates cell spreading, cytoskeletal state, and stem cell differentiation outcomes.