Microencapsulation of pancreatic islets has been proposed as a means to prevent allograft rejection and to protect islets during cryopreservation. The aim of this study was to investigate: 1) the effects of the cryoprotectants (CPAs) dimethyl sulfoxide (DMSO) and ethylene glycol (EG) on the volume of Ca 2+ alginate microcapsules, and 2) the effects of microencapsulation on the volumetric response of human and canine pancreatic islets during CPA equilibration. Stock sodium alginate with a high mannuronic acid content (HM) or a high guluronic acid content (HG) was used to generate empty capsules (mean diameter 200 μm) with an electrostatic generator. The capsules were held in place by a holding pipette system and videotaped during the addition of 2 or 3 M CPA at 22°C. Islets (isolated from human cadaveric donors and mongrel dogs and then cultured overnight at 37°C) were encapsulated in alginate (HM), loaded into a microperfusion chamber, and the change in islet volume was videotaped after exposure to the same CPAs and concentrations. These were compared to the volume responses of nonencapsulated islets. Images were analyzed using a computerized image analysis system and the data were analyzed using ANOVA. HG microcapsules showed a significant (p < 0.05) increase in volume following exposure to EG but not to DMSO. HM microcapsule volume did not change significantly following exposure to either EG or DMSO and was therefore chosen as the substrate for islet encapsulation. Free, nonencapsulated canine and human islets responded to the osmotic challenge of the 2 M DMSO by shrinking to 70.00 ± 1.04% (mean ± SEM) and 70.11 ± 1.05%, and in 2 M EG to 72.89 ± 1.93% and 69.33 ± 1.38%, respectively, of the isotonic volume before returning to the original cell volume. Exposure to 3 M DMSO or EG resulted in a further dehydration to 65.89 ± 0.91.% and 67.67 ± 1.91% for canine and 62.22 ± 0.66.% or 65.89 ± 1.30% for human islets. Minimum volumes were reached within 30–40 s after exposure to the cryoprotectant. Encapsulated human islets reached 86.88 ± 1.47% of their original volume in 2 M and 80.33 ±0.89% in 3 M DMSO, and 87.33 ± 1.86% in 2 M and 82.80 ± 1.57% in 3 M EG. This volume change was significantly less (p < 0.01) than that observed in corresponding free islets. Encapsulated canine islets reached 83.67 ± 2.13% of their original volume in 2 M and 78.22 ± 0.95% in 3 M DMSO, and 85.44 ± 1.92% in 2 M and 78.11 ± 2.01% in 3 M EG. As with human islets, this was significantly different than free islets (p < 0.01). These minimal volumes were reached within 30–50 s. These results demonstrate that there are cryoprotectant and alginate-specific interactions and that microencapsulation modulates the degree of osmotically induced shrinkage of islets. The development or modification of existing cryopreservation protocols to improve postcryopreservation recovery or function must account for these factors.