Diabetes remains a devastating disease, with tremendous cost in terms of human suffering and healthcare expenditures. The burden of diabetes is primarily related to the multiple complications, including retinopathy, nephropathy, neuropathy and cardiovascular disease that can develop as the disease progresses. It has been shown that these complications can be prevented, and in some cases, reversed by islet cell transplantation, which, until recently, had remained elusive as a viable routine treatment modality. In recent studies, islet cell transplantation has shown great promise as a viable alternative to solid pancreas transplantation. However, severe shortage of human pancreases and the need to use immunosuppressive drugs to prevent transplant rejection, remain major obstacles to routine use of islet cell transplants for the treatment of patients with Type 1 diabetes. In the attempt to overcome these barriers, many procedures have been designed to immunoisolate islet cells for transplantation. The ultimate goal in islet cell transplantation is the availability of unlimited supply of cells to be transplanted in a simple procedure performed with little or no use of immunosuppressive drugs. The development of reliable procedures to immunoisolate islets by microencapsulation prior to transplantation has a great deal of potential to accomplish this objective.