Chronic neuropathic pain, particularly peripheral pain, is a cause of great concern for diabetic patients. Current treatments include numerous agents such as capsaicinoids, a known deterrent of neuropathic pain despite the inconvenience associated with local side effects. In this context, the current work aims to elucidate the potential mechanisms involved in cytotoxicity by capsaicin and proposes an efficient formulation of capsaicin in alginate microcapsules, which significantly reduces side effects from capsaicin topical administration. For this, human dermal fibroblast cells were treated with alginate-microencapsulated capsaicin extracts and screened for potential cytotoxic effects produced by the treatment. Cell viability and morphology were examined, as well as oxidative stress status and anti-inflammatory potential. Our results show that the alginate encapsulated formulation of capsaicin exerted lower cytotoxic effects on human dermal fibroblasts as measured by cell viability and reactive oxygen species (ROS) production. Furthermore, the expression profiles of inflammatory cytokines were significantly altered by the treatment as compared with the control culture.