BACKGROUND: Facilitated oxygen transport by crosslinked hemoglobin (Hb-C) in islet microcapsules may promote transplanted graft function by improving islet functionality and viability. METHODS: This study investigated the in vivo efficacy of Hb-C as an oxygen carrier on the functionality and viability of microencapsulated rat islets. Hb-C by poly(ethylene glycol) was introduced into rat islet microcapsules (alginate-poly[L-lysine]-alginate microcapsule), and 500 suboptimal encapsulated islets were xenotransplanted into each streptozotocin-induced diabetic BALB/c mouse. The graft efficacy over time was evaluated by measuring nonfasting blood glucose level, body weight, and glucose tolerance. RESULTS: Mice that received Hb-C-containing microcapsules maintained normoglycemia for at least 8 weeks with normal glucose clearance, determined by intraperitoneal glucose tolerance test. However, the mice that received the conventional control islet microcapsule (without Hb-C) transplant showed graft failure in 4 weeks, exhibited by hyperglycemia, weight loss, and deteriorated glucose tolerance. Severe central necrosis of retrieved islets was observed for the control islet capsule graft after 8 weeks. CONCLUSION: The present study revealed that the incorporation of Hb-C in islet microcapsules promotes graft function for a longer period of time than the conventional islet capsules. Therefore, Hb-C coencapsulation is a potential approach for prolonging graft function of islet microcapsules and reducing the number of islets required for normoglycemia.