The neohemocytes described in this report average approximately 0.4 microns in diameter. The microcapsule membrane is composed of biodegradable lipids, including phospholipids, and has a structure similar to liposomes. In a suspension having an apparent hematocrit of 0.5, the neohemocytes occupy 50% of the volume, the neohemocyte membrane accounts for approximately 2%, and the hemoglobin suspension accounts for about 48% of the volume. The encapsulated hemoglobin suspension averages 15.8g%. The P50 averages 26, the Hill Number averages 2.1, and methemoglobin is typically less than 5%. Transfusions in rats of neohemocyte suspensions, where the RBC hematocrit is lowered below 0.03, consistently give a fivefold-or-better increase in survival time relative to transfusions of equal concentrations of unencapsulated hemoglobin. Many of the problems of hemoglobin microencapsulation have been overcome, and the results strongly indicate that neohemocytes may become the functional component of a resuscitative fluid for use in man.