Islets of Langerhans were isolated in high yields from canine pancreata. In the procedure, the pancreata were perfused and digested with collagenase, and the islets were then purified on histopaque density gradients. As many as 60,000 islets were isolated from a single pancreas. Islets were encapsulated in alginate-polylysine-alginate membranes with the aid of an air-jet droplet generator. In vitro studies demonstrated that the isolated and encapsulated islets secreted insulin in response to glucose and IBMX challenge for at least 9 weeks. In in vivo studies 6 diabetic Wistar rats were transplanted with 5,000 to 8,000 encapsulated islets each. The diabetic condition was reversed in all recipients for up to 112 days. In control animals, which received free, unencapsulated islets, the xenografts remained functional for fewer than 21 days. Microcapsules retrieved from normoglycemic transplant recipients 1 and 2 months posttransplantation were shown to contain viable islet tissue, and no cellular overgrowth was observed on capsular surfaces. The results of the study indicate a considerable clinical potential of microencapsulated canine islet xenografts.