Cytocompatible polysaccharide-based functional scaffolds are potential extracellular matrix candidates for soft and hard tissue engineering. This paper describes a facile approach to design cytocompatible, non-toxic, and multifunctional chitosan-cellulose based hydrogel beads utilising polysaccharide dissolution in sodium hydroxide-urea-water solvent system and coagulation under three different acidic conditions, namely 2 M acetic acid, 2 M hydrochloric acid, and 2 M sulfuric acid. The effect of coagulating medium on the final chemical composition of the hydrogel beads is investigated by spectroscopic techniques (ATR–FTIR, Raman, NMR), and elemental analysis. The beads coagulated in 2 M acetic acid displayed an unchanged chitosan composition with free amino groups, while the beads coagulated in 2 M hydrochloric and sulfuric acid showed protonation of amino groups and ionic interaction with the counterions. The ultrastructural morphological study of lyophilized beads showed that increased chitosan content enhanced the porosity of the hydrogel beads. Furthermore, cytocompatibility evaluation of the hydrogel beads with human breast adenocarcinoma cells (soft tissue) showed that the beads coagulated in 2 M acetic acid are the most suitable for this type of cells in comparison to other coagulating systems. The acetic acid fabricated hydrogel beads also support osteoblast growth and adhesion over 192 h. Thus, in future, these hydrogel beads can be tested in the in vitro studies related to breast cancer and for bone regeneration.