During encapsulation of proteins in biodegradable microspheres, a significant amount of the protein reportedly undergoes denaturation to form irreversible insoluble aggregates. Incomplete in vitro release of proteins from the microspheres is a common observation. An attempt was made to overcome this problem by pegylation of the protein to be encapsulated. Lysozyme, a model protein, was conjugated with methoxy polyethylene glycol (mPEG, MW 5000). The conjugate was characterized by SDS-PAGE, SE-HPLC, and MALDI-TOF mass spectroscopy. The pegylated lysozyme (Lys-mPEG) consisted of different isomers of mono-, di- and tri-pegylated with about 15% as native lysozyme. The specific activity of the protein was retained after pegylation (101.3+/-10.4%). The microsphere encapsulation process was simulated for pegylated and native lysozyme. Pegylated lysozyme exhibited much better stability than native lysozyme against exposure to organic solvent (dichloromethane), homogenization, and showed reduced adsorption onto the surface of blank PLGA microspheres. Release profiles of the two proteins from microspheres were very different. For native lysozyme, it was high initial release (about 50%) followed by a nearly no release (about 10% in 50 days). In contrast, Lys-mPEG conjugate showed a triphasic and near complete release over 83 days. This study shows that the pegylation of protein can provide substantial protection against the destabilization of protein during encapsulation.