An alternative form of gene therapy using recombinant cell lines delivering therapeutic products encapsulated in alginate hydrogel has proven effective in treating many murine models. The lack of long-term capsule stability has led to a new strategy to reinforce the microcapsules with a photopolymerized interpenetrating covalent network of N-vinylpyrrolidone (NVP) and sodium acrylate. Here the properties for potential application in gene therapy are reported. In assessing potential toxicity of the unpolymerized residues, HPLC showed that even after 1 week of washing, no toxic monomers could be detected. Their ability to sustain cell growth was monitored with growth of the encapsulated cells in vitro and in vivo. Although the initial photopolymerization caused significant cell damage, the cells were able to recover normal growth rates thereafter. After implanting into mice, the NVP-modified capsules showed a high level of biocompatibility as measured by hematological and biochemical functional tests. There was also no difference in the amount and type of plasma proteins adsorbing to the NVP-modified and the classical alginate capsules, thus indicating their similar biological compatibility. Both in vitro and in vivo tests confirmed that the NVP-modified capsules were more resistant to osmotic stress than the alginate microcapsules. Furthermore, when applied to the treatment of a murine model of human cancer by delivering encapsulated cells secreting angiostatin, the NVP-modified microcapsules suppressed tumor growth as successfully as the regular alginate microcapsules. In conclusion, the covalently modified microcapsules have shown a high level of biocompatibility, safety, increase in stability, and clinical efficacy for use as immunoisolation devices in gene therapy.