Pancreatic islets and insulinoma cells are particularly vulnerable to serious damage by cytotoxic nitric oxide (NO) and/or oxidative stress, most probably due to their low expression levels of antioxidant enzymes. This cellular damage has been regarded as one of major obstacles to success of encapsulated islet transplantation for the treatment of type 1 diabetes. As an approach to preventing NO induced damage, crosslinked hemoglobin (Hb-C) with poly(ethylene glycol) was co-encapsulated with rat islets or insulinoma cells (RINm5F) in alginate/poly(L-lysine)/alginate microcapsules. Hb-C effectively protected the cells from NO damage, generated by treating the cell microcapsules with S-nitroso-N-acetylpenicillamine (SNAP, a nitric oxide donor) at concentrations up to 400 microM, preserving higher viability and insulin secretion than a control group (no SNAP and no Hb-C). When the cells were incubated with SNAP without Hb, there was SNAP concentration dependent cellular damage, and a colorimetric TUNEL assay revealed a typical cell apoptosis sign, indicating DNA damages.