Cells, preferably isolated pancreatic islet cells, are treated with a compound or a combination of compounds selected from an antioxidant, an anti-cytokine, an anti-endotoxin and an antibiotic. The compound or combination of compounds is in a medium for culturing the cells before microencapsulation, in a medium for cryopreserving the cells by freezing followed by thawing and microencapsulation, in a medium for culturing the cells after microencapsulation, or in a medium for culturing the cells before microencapsulation and in a medium for culturing the cells after microencapsulation. Microcapsules containing cells may be incubated with a physiologically acceptable salt to increase durability of the microcapsules. In a preferred method, isolated pancreatic islet cells are cultured for about 12 to about 36 hours in a medium containing an antioxidant as the compound, cryopreserved by freezing in a medium containing the compound or combination of compounds, thawed and microencapsulated. The microcapsule contains a hydrogel core such gelled alginate and a semipermeable outer membrane such as formed with polylysine. Encapsulated pancreatic islet cells are provided for transplantation that have enhanced glucose-stimulated insulin production.