Recombinant erythropoietin (EPO) is widely administered for long-term treatment of anemia associated with renal failure and other chronic diseases. The ability to deliver EPO by gene therapy would have clinical and economic benefit. We compared autologous and allogeneic transduced primary vascular smooth muscle cells for their ability to provide sustained EPO gene expression when encapsulated in TheraCyte devices implanted subcutaneously (SQ) or intraperitoneally (IP) in rats. Cells were transduced with retrovirus vector LrEpSN encoding rat EPO cDNA. Rats that received either autologous or allogeneic transduced cells showed elevated hematocrits (HCTs) ranging from 50 to 79% that were sustained for more than 12 months. The HCT of control rats remained at baseline (45.8%). Rats that received second SQ implants of either autologous or allogeneic cells showed elevations in hematocrit that were sustained for up to 12 months, suggesting the absence of immunological responses to transduced cells or implant material. All experimental groups had statistically significant elevated HCT (p < 0.001) when compared with controls. Both SQ and IP implantation were equally effective in delivering EPO long term. There were no significant differences in white blood cell (WBC) or platelet (PLT) values between treated and control animals. Implantation of TheraCyte devices was well tolerated and histological evaluation of the devices up to 12 months after surgery revealed a high degree of vascularization and no evidence of host immune response. TheraCyte devices offer a simple and safe gene delivery system that provides sustained therapeutic gene expression, permit removal and implantation of new devices, and do not require immunosuppression of the host.