Cell-based regenerative therapies offer a new alternative approach to the treatment of chronic disease. Specifically, studies by our laboratory and others have shown that a subpopulation of cells derived from the bone marrow, known as early outgrowth cells (EOCs), are able to attenuate the progression of chronic kidney disease (CKD). In this study we examined the efficacy of a tissue engineering system, in which EOCs were embedded into submillimeter-sized collagen cylinders. These small individual units are referred to as modules and together form a functional microtissue. Due to their resemblance to endothelial cells, late outgrowth cells (LOCs) were used to coat the module surface, hypothesizing that as such they would promote vascularization and enhance engraftment of the encapsulated EOCs. These coated modules were transplanted subcutaneously into the subtotally nephrectomized rat model of CKD. While coated module therapy significantly improved both renal structure and function, noncoated modules with embedded EOCs were unable to reproduce these salutary effects on the kidney. Nevertheless, in both treatments, the embedded EOCs quickly degraded the modular environment and were seen to migrate to the liver, spleen, and bone marrow as early as 6 days after transplantation. With the efflux of EOCs, and unexpectedly no evidence of vascularization, we hypothesized that the LOCs did not enhance EOC engraftment, but rather augmented the renoprotection provided by EOCs by secretion of their own soluble and potent antifibrotic factors. To the best of our knowledge, this is the first study to document an effective subcutaneous approach for renoprotection.