The one-bead one-compound (OBOC) combinatorial library method enables the rapid generation and screening of millions of discrete chemical compounds on beads. Most of the OBOC screening methods require the library compounds to remain tethered to the bead during screening process. Methods have also been developed to release library compounds from immobilized beads for in situ solution phase or "lawn" assays. However, this latter approach, while extremely powerful, is severely limited by the lack of suitable solid supports for such assays. Here, we report on the development of a novel hydrogel TentaGel shell-core (HTSC) bead in which hydrogel is grafted onto the polystyrene-based TentaGel (TG) bead as an outer shell (5-80 mum thick) via free radical surface-initiated polymerization. This novel shell-core bilayer resin enables the preparation of encoded OBOC combinatorial small molecule libraries, such that the library compounds reside on the highly hydrophilic outer layer and the coding tags reside in the polystyrene-based TG core. Using fluorescein as a model small molecule compound, we have demonstrated that fluorescein molecules that have been linked covalently to the hydrogel shell via a disulfide bond could readily diffuse out of the hydrogel layer into the bead surrounding after reduction with dithiothreitol. In contrast, under identical condition, the released fluorescein molecules remained bound to unmodified TG bead. We have prepared an encoded OBOC small molecule library on the novel shell-core beads and demonstrated that the beads can be readily decoded.