In the present study, the insulin secretory capacity of TC6-F7 cells in microcapsules was evaluated. The cell mass within capsules was found to expand in a three-dimensional fashion, in contrast to cells seeded on plates that grew as a monolayer. In in vitro studies, both free and encapsulated cells were found to secrete insulin in the absence of glucose, at 13.6 ± 1.1 and 14.5 ± 0.9 ng · 10⁶ cells¹ · 60 min¹, respectively, with the response rising to a maximum of 26.0 ± 0.8 and 31 ± 2.3 ng · 10⁶ cells¹ · 60 min¹ in the presence of 16.8 mM glucose. Encapsulated cells were able to produce Ca²⁺ responses in the presence of KCl (50 mM) and BAY K 8644 (100 µM). In in vivo studies, intraperitoneal transplantation of 3.0 ×10⁶ microencapsulated cells into mice (n = 5) with streptozotocin-induced diabetes resulted in the restoration of normoglycemia up to 57 days. Insulin concentrations rose from 0.4 ± 0.1 ng/ml before the graft administration to 2.2 ± 0.8 ng/ml after the transplantation in the normoglycemic recipients. An oral glucose challenge in transplant recipients demonstrated a flat glucose response, suggesting extremely high glucose clearance rates. These data demonstrate the potential use of the immunoisolated -cell lines for the treatment of diabetes.