Pancreatic-islet-cell transplantation may reverse hyperglycaemia in diabetic recipients that undertake general pharmacological immunosuppression. A major challenge that remains is the need to avoid immunosuppression associated with the use of allogeneic or heterologous islet cells. In the present study we demonstrate the use of microencapsulation of cells using artificial biocompatible and permselective membranes prepared with alginic acid derivatives and polyamino acids. While characterization of the microcapsule constituent polymers continues to progress, other technical issues such as definition of the immunobarrier capacity, biocompatibility, size, shape and graft site have come into sharper focus. Assessment of microcapsules properties, in order to establish possible guidelines for fabrication of reproducible membranes, and results from both in vitro functional testing, and in vivo encapsulated-islet-transplant outcome in several animal models of diabetes are reported.