Fetal pancreatic islets were isolated from 21-day pregnant Wistar rats and enclosed in semipermeable alginate-polylysine-alginate capsules. Encapsulated islets that had been previously cultured for eight days in vitro were shown to secrete insulin in response to glucose challenge: low-glucose, high-glucose, and high-glucose + 3-isobutyl-1-methyl-xanthine (IBMX). Transplants of 800-1000 encapsulated cultured fetal islets into the peritoneal cavities of BALB/c mice with streptozotocin-induced diabetes restored normoglycemia for up to 171 days without immunosuppression. When the capsules were removed from 2 of the recipients they both quickly regressed to a diabetic state. Control groups of diabetic mice received unencapsulated, uncultured islets or empty capsules. The mortality rate among these animals was high and none experienced relief from hyperglycemia for longer than 6 days. These results demonstrate that cultured microencapsulated fetal rat islets of Langerhans can release insulin in response to an in vitro glucose challenge, and that transplants of these islets into diabetic mice can restore normoglycemia without the need for immunosuppressive therapy.