Transplantation of isolated hepatocytes has been proposed to compensate for essential functions lacking in liver failure or for genetic defects that alter a specific liver metabolic pathway. Hepatocyte utilization for these purposes would be facilitated with a reliable, reproducible, and effective method of long-term hepatocyte storage. We have recently developed a simple new system for cryopreservation of hepatocytes that encapsulates alginate microspheres and maintains liver-specific function. The aim of this study was to elucidate the transport and drug-metabolizing enzyme activities of cryopreserved microencapsulated hepatocytes stored for a long time. Morphological examinations showed there is no apparent injury of the hepatocytes during cryopreservation processes. A drug-metabolizing enzyme (testosterone 6beta-hydroxylase, a specific probe for CYP3A2) and drug transport activities [salicylate, allopurinol, and prostaglandin E2 (PGE2), typical substrates of rOat2] in cryopreserved microencapsulated hepatocytes were maintained up to 120 days. Our results thus demonstrate for the first time that cryopreservation of primary rat hepatocytes by the encapsulation technique allows long-term retention of drug metabolism and drug transport activities.