Isolated rat islets were microencapsulated in alginate beads of about 1.5 mm in diameter. These were cocultured with activated or resident peritoneal macrophages of syngeneic rats for 24 hr. Examination of the encapsulated islets by transmission electron microscopy showed that the islets were lysed by activated (80.0 +/- 12.8% of islets lysed), but not by resident, macrophages (17.5 +/- 12.2% lysis) despite encapsulation. Islet lysis was inhibited in a concentration-dependent manner by a specific nitric oxide-synthase inhibitor (0.5 mM NG-methyl-L-arginine: 5.9 +/- 3.9% lysis) in an L-arginine-reversible manner (0.5 mM NG-methyl-L-arginine + 10 mM L-arginine: 55.1 +/- 16.6% lysis). Incubation of encapsulated islets with 3 different nitric oxide-generating compounds also resulted in a concentration-dependent islet lysis. Coencapsulation of autologous erythrocytes was found to be an effective and easy way of protection from macrophage-mediated lysis. Protection was dependent upon the number of erythrocytes coencapsulated. This in vitro study demonstrates that nitric oxide secreted by activated macrophages is able to destroy islets despite encapsulation in alginate, and that both, inhibition of nitric oxide formation using enzyme inhibitors and scavenging of nitric oxide once formed exploiting the hemoglobin of autologous erythrocytes, protect encapsulated islets from destruction.