The aim of this study is to develop methods to reinforce polymeric microspheres with cellulose nanocrystals (CNCs) to make eco-friendly microcapsules for a variety of applications such as medicines, perfumes, nutrients, pesticides, and phase change materials. Surface hydrophobization treatments for CNCs were performed by grafting poly(lactic acid) oligomers and fatty acids (FAs) to enhance the dispersion of nanoparticles in the polymeric shell. Then, a straightforward process is demonstrated to design sustained release microcapsules by the incorporation of the modified CNCs (mCNCs) in the shell structure. The combination of the mCNC dispersion with subsequent interfacial polyurea (PU) to form composite capsules as well as their morphology, composition, mechanical properties, and release rates were examined in this study. The PU microcapsules embedded with the mCNC were characterized by Fourier transform infrared spectroscopy (FT-IR) and thermogravimetric analysis (TGA). The morphologies of the microcapsules were characterized by optical microscopy (OM) and scanning electron microscope (SEM). The rupture stress and failure behavior of the microcapsules were determined through single-capsule compression tests. Oil-soluble Sudan II dye solution in mineral oil was utilized as a model hydrophobic fill, representing other latent fills with low partition coefficients, and their encapsulation efficiency was measured spectroscopically. The release rates of the encapsulated dye from the microcapsules were examined spectroscopically by both ethanol and 2-ethyl-l-hexanol medium at room temperature. The concentration of released dye was determined by using UV vis absorption spectrometry (UV vis). The mCNC embedded poly(urea urethane) capsules have strong and dense walls, which function as excellent barriers against leakage due to their extended diffusion path length and ensure enough mechanical strength from rupture for handling or postprocessing.