Hepatocytes encapsulated in alginate-poly-1-lysine-alginate (APA) are used in transplantation studies and in bioartificial liver support systems. Loss of cell viability in the process of APA encapsulation is usually 20-30% while the effect on cytochrome CYP450 activity is rarely reported. This work investigates the negative influences on hepatocyte viability and CYPIA1 activity during APA encapsulation, and reports methods to alleviate these influences by incorporating certain reagents into the encapsulation solution. The results show that loss of hepatocyte viability and CYPIA1 activity was caused almost entirely by extracellular calcium toxicity rather than by mechanical damage (p < 0.05). Use of 10 mM instead of 100 mM calcium chloride (CaCl2) in the encapsulation process improved CYPIA1 activity (p < 0.05), but did not improve hepatocyte viability (p > 0.05) or result in satisfactory microcapsules. Hepatocyte viability was 25% higher (p < 0.05) in CaCl2 than in calcium lactate (CaLa) when the cells were gelled by contact with these calcium solutions at room temperature (RT). Hepatocyte viability showed little improvement by processing at 4 degrees C than at RT in CaCl2 (p > 0.05) but was 23% higher at 4 degrees C than at RT in CaLa (p < 0.05). Calcium used in the process of encapsulation caused cell necrosis rather than apoptosis. Addition of Dulbecco's modified Eagle's medium (containing 10% foetal bovine serum) or 20 mM fructose to the calcium solution did not improve cell survival. However, nifedipine at a final concentration of 25 mM modestly improved hepatocyte survival in solution containing 100 mM CaCl2 (p = 0.003). Glutathione and taurine in certain concentrations showed protective effects against loss of CYPIA1 activity (p < 0.05 and <0.01 respectively). In conclusion, to optimise the use of calcium during the process of encapsulation, CaCl2 is preferred to CaLa and inclusion of nifedipine, glutathione or taurine in 100 mM CaCl2 solution is recommended.