BACKGROUND AND OBJECTIVES: The application of microencapsulated stem cells has been shown to have many advantages in various fields of medical research. However, optimal modes for preparation of microencapsulate stem cells need to be improved, and expression and release of products of microencapsulated gene modified stem cells need to be studied in vitro. AIM OF THE STUDY: To explore the optimal parameters when preparing microencapsulated stem cells, and to investigate the effect of microencapsulation on growth, secretion, and metabolism of genetically modified human Umbilical Cord Mesenchymal Stem Cells (hUCMSCs). MATERIALS AND METHODS: In this study, the parameters of preparation were regulated by observing the microcapsule shape and size. Live/dead cell viability kits and fluorescein isothiocyanate-labeled dextrans (FD) were used to detect the microencapsulated cell viability, and the permeability of microcapsules, respectively. Vascular endothelial growth factor (VEGF) production in the supernatant of microencapsulated and non-microencapsulated VEGF gene-modified hUCMSCs cultures was measured by ELISA. RESULTS: The optimal parameters of preparing microcapsules were regulated as followed: bolus velocity was 6 ml/h, and airflow velocity was 3 L/min. The morphology of microcapsules was a spherical structure with a diameter of 450 ± 30 µm. More than 90% of the cells were viable after 21 days of culture. Low and middle molecular weight FD was able to pass through the microcapsules; however, high molecular weight FD was not. Also, the VEGF concentration in microencapsulated and non-microencapsulated cell culture supernatants exhibited no significant difference at each time point. CONCLUSIONS: Microencapsulated stem cells can be ideally prepared via specifically regulated preparation. Lastly, microencapsulation does not alter growth, secretion, and metabolism of the genetically modified hUCMSCs.