Many diseases are closely tied to deficient or subnormal metabolic and secretory cell functions. Milder forms of these diseases can be managed by a variety of treatments. However, it is often extremely difficult or even impossible to imitate the moment-to-moment fine regulation and the complex roles of the hormone, factor or enzyme that is not sufficiently produced by the body. Immunoisolated transplantation is one of the most promising approaches to overcome the limitations of current treatments. Non-autologous (transformed) cell lines and allogeneic and xenogeneic cells/tissues that release the therapeutic substances are enclosed in immunoprotective microcapsules. The microcapsules avoid a lifetime of immunosuppressive therapy while excluding an immune response in the host. Research in this direction has shown the feasibility of microcapsules based on hydrogels (particularly of alginate) for transplantation of non-autologous cells and tissue fragments. Numerous technical accomplishments of the immunoisolation method have recently made possible the first successful long-term clinical applications. However, realizing the potential of immunoisolated therapy requires the use of several factors that have received limited attention in the past but are important for the formulation of hydrogel-based immunoisolation systems that are highly versatile, potentially economical and can gain medical approval.