Allogeneic islets obtained from Lewis rats were transplanted into diabetic BB/W rats with or without cyclosporine. In addition, these islets were encapsulated in alginate-poly L-lysine membranes and then transplanted into diabetic BB/W rats with or without immunosuppressive and/or antiinflammatory agents. The agents used were cyclosporine, dexamethasone, indomethacin (Ind), or a combination of these. Our results show that islets alone survived for 7 days, with or without CsA therapy. Encapsulated islets survived for 14.2 days, and this was extended by CsA, Dex, or CsA + Ind. Loss of encapsulated graft functions was associated with formation of a dense pericapsular infiltrate, which was inhibited by CsA, Dex, CsA + Ind, or CsA + Dex. In addition, the infiltrate was reduced in animals that had diabetes for long periods of time (greater than 5 months versus less than 1 month). Empty capsules also provoked this cellular response. Thus, encapsulation of islets resulted in slightly prolonged islet survival, which was further enhanced by immunosuppression.