We investigated the feasibility of micro-encapsulation technology for the evaluation of anti-human immunodeficiency virus (HIV) drugs in vivo. The ability to place human cells in microcapsules with semipermeable membranes for implantation into test animals led to the development of this assay. The anti-HIV activity assay involves microencapsulating human T-lymphoblastoid cells sensitive to the cytopathic effects of HIV; the encapsulated cells are then implanted into athymic nude mice and recovered after drug treatment in vivo. A positive antiviral effect of the test substance is indicated by growth or survival of the virus-infected cells in the microcapsules. Several HIV-sensitive cell lines of T-lymphocyte, monocyte, and nonlymphocyte origin were examined for growth in microcapsules in vitro and in vivo. Light and electron microscopic analysis of the capsules and the human cells contained therein revealed the invasion of mouse immune cells and other adverse effects that could not be overcome by any of numerous technical modifications attempted. We conclude that cellular microencapsulation technology is not feasible for in vivo drug-testing protocols because of immunogenic reactions.