A major challenge in developing therapies based on progenitor or stem cell populations (from sources other than bone marrow) involves developing a mode to deliver these cells in a manner that optimizes their viability, engraftment, proliferation, and differentiation. We have previously isolated a hepatic progenitor cell (HPC) population from adult liver tissue that differentiates into hepatic and biliary cell subtypes. We postulated that, using electrostatic encapsulation, we could reproducibly generate an ex vivo environment for the HPCs. We also theorized that this approach would foster cellular viability and function of the progenitor cell population. Using this encapsulation process, we consistently produced beads with uniform diameters between 200 and 700 microm. In vitro analysis of the encapsulated beads demonstrated extended periods of viability and function based on albumin production, urea metabolism, and glycogen storage. In conclusion, HPC encapsulation fosters the subsequent differentiation of HPCs into functional cells while maintaining their viability in long-term culture. These results demonstrate the efficacy of this method using somatic-derived progenitor cell populations and pave the way for clinical therapies.