Microencapsulation-mediated cell therapy overcomes the immune incompatibility between donor and recipient in transplantation. The aim of this study was to investigate the effects of transplantation of microcapsules containing a mixture of rat hepatocytes and human fetal liver stromal cells (hFLSCs), engineered to produce basic fibroblast growth factor (bFGF), on acute liver failure (ALF) in mice. In vitro experiments showed that different combinations of microencapsulated rat's hepatocytes and stromal cells survive, grow, and function better in three-dimensional conditions. The metabolic activity of rat hepatocytes co-microencapsulated with hFLSCs, particularly when engineered to produce bFGF (FLSCs/bFGF), is significantly higher than that of microcapsules with rat hepatocytes alone. Intraperitoneal transplantation of the encapsulated hepatocytes with FLSCs/bFGF increased the survival rate and improved liver function of an ALF mouse model induced by a 70% partial hepatectomy in BALB/C mice. Moreover, dramatic liver regeneration was observed 2 days after transplantation in the group that received intraperitoneal transplantations of encapsulated hepatocytes with FLSCs/bFGF. Therefore, transplantation of encapsulated hepatocytes and hFLSCs/bFGF may be a promising strategy to treat ALF or related liver diseases.