OBJECTIVE To evaluate the potential risk of porcine endogenous retrovirus (PERV) cross-species transmission xenotransplanted with microencapsulated neonatal pig islets (NPIs). METHODS Ten dogs were randomly divided into an experiment group and a control group. The experiment group was transplanted with microencapsulated NPIs, and the control group was transplanted with non-microencapsulated NPIs. Glucose tolerance test (GTT) was performed to evaluate the function of microencapsulated NPIs after the transplantation; immunity histochemistry was used to detect the microencapsulated NPIs in the liver of dogs which had been transplanted after 28 days; PCR and RT-PCR were performed to detect PERV and pig mitochondrial (mt) DNA in the blood samples obtained from recipients at various time points after the transplantation. RESULTS The level of serum special porcine C peptide increased significantly after the injection of glucose for 15 approximately 30 min in dogs which were transplanted with the micro-encapsulated NPIs over 2 weeks, while special porcine C peptide could not be detected in the control group. Immunity histochemistry showed that a few microencapsulated NPIs were still alive in the liver of the dog, and the liver was not damaged. PCR and RT-PCR showed that pig mt DNA and PERV could not be detected in the experiment group 1 approximately 28 days after the transplantation, while very weak expression of that in the control could be detected in the first 4 days and disappeared 10 days after the transplantation. CONCLUSION Microencapsulated NPIs can survive and have biological function in dogs. There is no evidence of PERV replication, suggesting that the xenotransplantation with microencapsulated NPIs can prevent PERV effectively, and may have great value.