Microencapsulation is a commonly used technique for immunoprotection of engrafted therapeutic cells. We investigated a library of capsule formulations to determine the most optimal formulation for pancreatic beta islet cell transplantation, using barium as the gelating ion and clinical-grade protamine sulfate (PS) as a new cationic capsule cross-linker. Barium-gelated alginate/PS/alginate microcapsules (APSA, diameter = 444±21 μm) proved to be mechanically stronger and supported a higher cell viability as compared to conventional alginate/poly-L-lysine/alginate (APLLA) capsules. Human pancreatic islets encapsulated inside APSA capsules, gelated with 20 mM barium as optimal concentration, exhibited a sustained morphological integrity, viability, and functionality for at least 3–4 weeks in vitro, with secreted human C-peptide levels of 0.2–160 pg/ml/islet. Unlike APLLA capsules that are gelled with calcium, barium-APSA capsules are intrinsically radiopaque and, when engrafted into mice, could be readily imaged in vivo with micro-computed tomography (CT). Without the need of adding contrast agents, these capsules offer a clinically applicable alternative for simultaneous immunoprotection and real-time, non-invasive X-ray/CT monitoring of engrafted cells during and after in vivo administration.