Iron (Fe) encapsulation has the potential to help overcome several major challenges in Fe fortification of foods. It may decrease unwanted sensory changes in fortified products and reduce interactions of Fe with food components that lower Fe bioavailability. However, the effect of encapsulation per se on Fe bioavailability is a concern. Rat studies comparing encapsulated ferrous sulfate, ferric ammonium citrate, and ferrous fumarate to non-encapsulated compounds indicate that a ratio of capsule:substrate of > or = 60:40 may decrease the relative bioavailability (RBV) of the Fe by approximately 20%. At a ratio of capsule:substrate of < or = 50:50, the RBV of encapsulated ferrous sulfate appears to be similar to ferrous sulfate. Even minor changes in capsule composition may influence Fe bioavailability. Encapsulated ferrous fumarate given with ascorbic acid as a complementary food supplement and encapsulated ferrous sulfate fortified into salt have been shown to be efficacious in anemic children. For salt fortification, further refinements in Fe capsule design are needed to increase resistance to moisture and abrasion, while maintaining bioavailability. Studies evaluating the potential efficacy of encapsulated Fe in staple cereals (wheat and maize flours) are needed. A potential barrier to use of encapsulated forms of Fe in staple food fortification is the relatively low melting point of the capsules, which may cause unwanted sensory changes during food preparation. Research and development efforts to improve the quality of coatings and their resistance to high temperatures are ongoing. Process costs for encapsulation can be high, and unless they can be reduced, may limit applications. Further research is needed to determine which encapsulation technologies are most effective in ensuring iron bioavailability from encapsulated compounds.