The pharmacokinetic properties of a drug can be significantly improved by the delivery process. Scientists have understood that developing suitable drug delivery systems that release the therapeutically active molecule at the level and dose it is needed and during the optimal time represents a major advance in the field. Cell microencapsulation is an alternative approach for the sustained delivery of therapeutic agents. This technology is based on the immobilization of different types of cells within a polymeric matrix surrounded by a semipermeable membrane for the long-term release of therapeutics. As a result, encapsulated cells are isolated from the host immune system while allowing exchange of nutrients and waste and release of the therapeutic agents. The versatility of this approach has stimulated its use in the treatment of numerous medical diseases including diabetes, cancer, central nervous system diseases and endocrinological disorders among others. The aim of this review article is to give an overview on the current state of the art of the use of cell encapsulation technology as a controlled drug delivery system. The most important advantages of this type of "living" drug release strategy are highlighted, but also its limitations pointed out, and the major challenges to be addressed in the forthcoming years are described.