Prevention of rejection and prolongation of graft survival are critical to achieving successful islet cell transplantation. Various techniques have been utilized to prolong graft survival. Recently, protection of pancreatic islets from host immune mechanisms by isolating the islets in artificial membranes has emerged as an attractive alternative to the use of immunosuppression. In this Rapid Communication, we describe a novel method for macroencapsulation of rat islets in hydrophilic macrobeads made with various combinations of agarose, collagen, and Gelfoam. Encapsulated xenotypic islets were placed intraperitoneally in mice in which diabetes was induced by streptozotocin. The encapsulated xenografts maintained normoglycemia > 170 days. Recipients mice had normal glucose tolerance tests, which indicates that the islets in the macrobeads were functioning as they would in an intact pancreas. Macrobeads retrieved up to 103 days after transplantation showed no evidence of tissue reaction or local inflammation. These retrieved macrobeads could also be retransplanted and replaced. Our studies indicate that the agarose-collagen/Gelfoam macrobeads we have developed serve both to protect islet xenografts from rejection and to provide a microenvironment in which the islets maintain and support their normal function in vivo. Because they may be retrieved after implantation and replaced, these macrobeads may be suitable for human clinical islet cell xenotransplantation.