Here we propose a novel encapsulated vertical 3D RRAM structure with each resistive switching cell encapsulated by dielectric layers, contributing to both the reliability improvement of individual cells and thermal disturbance reduction of adjacent cells due to the effective suppression of unwanted oxygen vacancy diffusion. In contrast to the traditional vertical 3D RRAM, encapsulated bar-electrodes are adopted in the proposed structure substituting the previous plane-electrodes, thus encapsulated resistive switching cells can be naturally formed by simply oxidizing the tip of the metal bar-electrodes. In this work, TaO x -based 3D RRAM devices with SiO2 and Si3N4 as encapsulation layers are demonstrated, both showing significant advantages over traditional unencapsulated vertical 3D RRAM. Furthermore, it was found thermal conductivity and oxygen blocking ability are two key parameters of the encapsulation layer design influencing the scalability of vertical 3D RRAM. Experimental and simulation data show that oxygen blocking ability is more critical for encapsulation layers in the relatively large scale, while thermal conductivity becomes dominant as the stacking layers scale to the sub-10 nm regime. Finally, based on the notable impacts of the encapsulation layer on 3D RRAM scaling, an encapsulation material with both excellent oxygen blocking ability and high thermal conductivity such as AlN is suggested to be highly desirable to maximize the advantages of the proposed encapsulated structure. The findings in this work could pave the way for reliable ultrahigh-density storage applications in the big data era.