Several studies have demonstrated that in vitro culture of islets prolonged islet graft survival in immune-competent mice without administration of antirejection drugs. However, we recently showed that in vitro cultured microencapsulated neonatal porcine islets (NPI) were rejected in immune-competent mice not receiving antirejection therapy. The aim of this study was to determine whether culture of microencapsulated NPI in vivo could promote long-term survival of microencapsulated NPI in immune-competent mice without administration of antirejection drugs. Microencapsulated NPI that were cultured in vitro for 7 and 50 days or transplanted initially in immune-deficient C.B.-17 SCID-BEIGE mice for 100 days (in vivo cultured) were characterized and transplanted into streptozotocin-induced diabetic immune-competent BALB/c mice. Day 50 in vitro cultured and day 100 in vivo cultured microencapsulated NPI showed significantly higher insulin and DNA content, indicating maturation of NPI compared to day 7 in vitro cultured microencapsulated NPI. Interestingly, in vivo cultured microencapsulated NPI expressed lower levels of porcine antigens compared to day 7 and day 50 in vitro cultured microencapsulated NPI. Transplantation of day 7 in vitro cultured microencapsulated NPI did not reverse diabetes in immune-competent BALB/c mouse recipients. In contrast, transplantation of day 50 in vitro cultured and in vivo cultured microencapsulated NPI into diabetic immune-competent BALB/c mice resulted in the immediate reversal of hyperglycemia within 2 days posttransplantation. However, all recipients of day 50 in vitro cultured microencapsulated NPI eventually rejected their grafts by day 15 posttransplantation, while 6 of 10 BALB/c mouse recipients of in vivo cultured microencapsulated NPI maintained normoglycemia for 100 days posttransplantation. These results show that in vivo culture of NPI in immune-deficient mice results in the modulation of NPI, which allows for their long-term survival in immune-competent mice without antirejection therapy.