Interlukin-6 (IL-6) is a pleitropic cytokine that plays a central role in normal and abnormal hepatic function and response. The aims of the current study were to determine the viability of using cell encapsulation technology to introduce a genetically modified xenogeneic (CHO) cell population to elevate circulating levels of rhIL-6 in a rat model and determine the effects of sustained high rhIL-6 levels on hepatocellular carcinoma (HCC) progression in vivo. An alginate matrix was combined with transfected CHO cells, selected for their ability to synthesize rhIL-6, and used to generate uniform alginate-cell beads. Once encapsulated transfected cells continued to undergo replication, formed colonies within the bead, and synthesized/released large quantities of rhIL-6 into culture medium in vitro. Intraperitoneal implantation of beads into rats resulted in significantly increased circulating and intrahepatic levels of rhIL-6 up to 4 days postimplantation. Prolonged implantation led to the escape of CHO cells from the bead, resulting in a host response and CHO cell death within the bead. Subsequently CHO-IL-6 encapsulated cells were implanted into rats previously inoculated intrahepatically with the H4IIE HCC cell line. These studies demonstrated the maintenance of high circulating/intrahepatic rhIL-6 levels in this model. Despite significantly increased rhIL-6, this technique did not significantly alter the rate of net tumor progression. However, Stat3 activity was significantly increased in both normal liver and HCC tissue resected from animals implanted with CHO-IL-6 cells. Collectively these data demonstrate the short-term viability of using cell encapsulation technology to generate high levels of active circulating and intrahepatic cytokines and raise the possibility of modifying specific signal transduction cascades identified to be important during tumor progression.