The original report on the microencapsulation of islets of Langerhans used sodium alginate and poly-L-lysine (PLL) to form the capsules. Although several alternative materials have subsequently been used with vary-mg degrees of success, it is those studies using islets encapsulated in alginate-PLL-alginate which are reviewed in detail in this article. Since the first report of islet microencapsulation, many studies have demonstrated excellent in vitro viability of encapsulated islets. However, transplantation experiments into chemically induced diabetic recipients have yielded varied results, with some studies showing good long-term graft function whilst in others grafts failed due to pericapsular fibrosis. The use of naturally occurring animal models of type 1 (insulin-dependent) diabetes has demonstrated a decline in graft function, suggesting that this presents a more complex problem to be solved than that in chemically induced diabetic recipients. Fibrosis of capsules has been the major problem causing graft failure, and this has been demonstrated to be more severe in spontaneously diabetic models. However, recent advances in alginate purification and attempts to reduce the size of the encapsulated islets are major steps towards encapsulated islet transplants becoming a viable proposition for the treatment of type 1 diabetic patients.