To investigate the antiangiogenic potential of encapsulated VEGF₁₆₅b producing HEK293 cells, Human Embryonic Kidney 293 (HEK293) cells were stably transfected to produce VEGF₁₆₅b. Then they were encapsulated in alginate-polylysine-alginate (APA) microcapsules. VEGF₁₆₅b productivity and viability of encapsulated cells were analyzed and compared with the non-encapsulated cells. Results showed that encapsulated cells proliferated and remained viable within the microcapsules throughout the 28-day period of the experiment. The quantity of VEGF₁₆₅b increased from 6.5 ± 1.2 μg/ml at day 13 to 13 ± 0.96 μg/ml at day 16. Then it gradually dropped to 5 ± 1.2 μg/ml for the last 3 days period as measured at day 28. Production of VEGF₁₆₅b from encapsulated and non-encapsulated cells was similar. The effect of VEGF₁₆₅b harvested from encapsulated cells on Human Umbilical Vein Endothelial cells (HUVECs) proliferation were also examined.The same inhibitory effects on HUVECs proliferation was seen when the cells were incubated with a mixture of VEGF₁₆₅b and a 2-fold VEGF₁₆₅b or with VEGF₁₆₅b and 2-fold excess VEGF₁₆₅b released from encapsulated cells. Subcutaneous injection of microencapsulated VEGF₁₆₅b producing cells in tumor site of nude mice resulted in the reduction of the number of vessels around the tumors.