Microencapsulation, as a tool for immunoisolation for allogenic or xenogenic implants, is a rapidly growing field. However most of the approaches are based on alginate/polylysine capsules, despite this system's obvious disadvantages such as its pyrogenicity. Here we report a different encapsulation system based on sodium cellulose sulfate and polydiallyldimethyl ammonium chloride for the encapsulation of mammalian cells. We have characterized this system regarding capsule formation, strength and size of the capsules as well as viability of the cells after encapsulation. In addition, we demonstrate the efficacy of these capsules as a "microfactory" in vitro and in vivo. Using encapsulated hybridoma cells we were able to demonstrate long-term release of antibodies up to four months in vivo. In another application we could show the therapeutic relevance of encapsulated genetically modified cells as an in vivo activation center for cytostatic drugs during tumor therapy.