There has been increasing evidence indicating that islet transplantation may offer an ideal endocrine replacement therapy for patients with Type I diabetes mellitus. However, allogenic islets are susceptible to immune rejection. In 1980, Lim and Sun first reported a novel technique of microencapsulation by which pancreatic islets used as transplants could be encapsulated and immunoisolated so as to survive and function for a period of 2-3 weeks. By further improving the biocompatibility of the capsular membrane, Sun's group demonstrated that islet allografts can be protected from rejection for up to 21 months in nonimmunosuppressed, streptozotocin-induced diabetic rats. The biocompatible polymer capsule membrane constitutes a physical barrier to the host's immune system. Permeability of the membrane can be controlled to allow free diffusion of small molecular nutrients, hormones, and metabolites, but exclude lymphocytes, leukocytes, and macromolecular immunoglobulins and complement. Darquy and Reach, in 1985, disclosed the role of the microcapsule membrane in protecting islets from cytotoxic antibodies. Sun's group further demonstrated that the microencapsulation technique effectively protected xenografts of rat islets transplanted into diabetic mice. In a previous report, we described the success of allotransplanted microencapsulated rat islets in treating streptozotocin-induced diabetes in Wistar rats. We now report the in vitro study of human fetal islets microencapsulated within an alginate-polylysine membrane. A preliminary clinical trial of allotransplants for the treatment of insulin-dependent diabetics is also presented.