Transplantation of cells and tissues secreting a desirable therapeutic product shows a potential in the treatment of many human diseases such as diabetes, hemophilia, dwarfism, immunodeficiencies, anemia, hypocalcemia, and some neurodegenerative disorders. To avoid graft rejection, the transplanted tissue is immunoisolated in a semipermeable membrane, thereby creating an implantable biohybrid artificial organ. A number of encapsulation systems such as vascular implants, diffusion chambers, and microcapsules have been developed for cell therapy. The encapsulation membrane should allow for diffusion of nutrients, dissolved gases, and wastes and should be impermeable to the components of the immune system, including cellular and humoral components. Encapsulation cell technology offers a solution to the problem of donor organ supply, not only by potentially allowing the transplantation of cells and tissues without immunosuppresion, but also by permitting use of tissue isolated from animals. However, further research is required in the areas of encapsulation device design and tissue supply from primary or cell-culture sources.