Cell therapies to treat critical limb ischaemia have demonstrated only modest results in clinical trials, and this has been partly attributed to poor cell retention following their delivery directly into the ischaemic limb. The aim of this study was to determine whether alginate encapsulation of therapeutic pro-angio/arteriogenic macrophages enhances their retention and ultimately improves limb perfusion. A reproducible GMP-compliant method for generating 300 µm alginate capsules was developed to encapsulate pro-angio/arteriogenic macrophages. Longitudinal analysis revealed no detrimental effect of encapsulation on cell number or viability in vitro, and macrophages retained their pro-angio/arteriogenic phenotype. Intramuscular delivery of encapsulated macrophages into the murine ischaemic hindlimb demonstrated increased cell retention compared with injection of naked cells (P = 0.0001), and that this was associated both enhanced angiogenesis (P = 0.02) and arteriogenesis (P = 0.03), and an overall improvement in limb perfusion (P = 0.0001). Alginate encapsulation of pro-angio/arteriogenic macrophages enhances cell retention and subsequent limb reperfusion in vivo. Encapsulation may therefore represent a means of improving the efficacy of cell-based therapies currently under investigation for the treatment of limb ischaemia.