The implantation of nonautologous cells encapsulated in immunoprotective microcapsules provides an alternative nonviral method for gene therapy. This strategy was successful in reversing the disease phenotypes of dwarfism and a lysosomal storage disease, mucopolysaccharidosis VII, in murine models. In this article we implanted transgenic hemophilic B mice with microcapsules enclosing factor IX-secreting C2C12 myoblasts to study the clinical potential of this approach in the treatment of hemophilia. Treated mice showed increased plasma factor IX levels as high as 28 ng of human factor IX per milliliter of plasma and decreased activated thromboplastin times (reduced by 20% to 29%). However, the level of factor IX decreased to baseline levels by day 7, coinciding with emergence of anti-human factor IX antibody, the titer of which increased greater than 10-fold by day 28. Monoclonal anti-CD4 antibodies were used to deplete CD4+ T cells to suppress the immune response against the recombinant factor IX. In the treated hemophilic mice, the anti-factor IX antibody response was totally suppressed to beyond day 28 accompanied by a significant decrease in activated thromboplastin time compared with that seen in untreated hemophilic mice. When the microcapsules were recovered from the intraperitoneal cavity after 38 days of implantation, the encapsulated cells continued to secrete factor IX at preimplantation levels, but both cell viability and microcapsule mechanical stability were reduced. Hence although the polymer chemistry of the microcapsules and cell viability may need to be improved for long-term delivery, nonautologous gene therapy with microencapsulated cells has been shown to be effective, at least for the short-term, in alleviating the hemophilic hemostatic anomaly. Coadministration of an immunosuppressant is effective in inhibiting antibody development against the delivered factor IX and should be considered for recipients at risk of inhibitor development.