This article describes a novel method of urea and ammonia removal using microencapsulated, genetically engineered Escherichia coli DH5 cells. Optimization of bacterial cell encapsulation was carried out. The optimal method consists of alginate 2.00% (w/v) at a flow rate of 0.0724 mL/min and a coaxial air flow rate of 2.00 L/min. This produces spherical, alginate-poly-L-lysine-alginate (APA) microcapsules of an average 500 +/- 45 mu m diameter. Increasing the concentration of alginate from 1.00% to 1.75% improves the quality of the microcapsules, while cell viability remains unaffected. The APA microcapsules are mechanically stable up to 210-rpm agitation with no bacterial cell leakage. The in vitro performance of urea and ammonia removal by encapsulated bacteria is assessed. One hundred milligrams of bacterial cells in APA microcapsules, in their log phase state of growth, can lower 87.89 +/- 2.25% of the plasma urea within 20 min and 99.99% in 30 min. The same amount of encapsulated bacteria can also lower ammonia from 975.14 +/- 70.15 mu M/L to 81.151 +/- 7.37 mu M/L in 30 min. There are no significant differences in depletion profiles by free and encapsulated bacteria for urea and ammonia removal. This novel approach using microencapsulated, genetically engineered E. coli cells is significantly more efficient than presently available methods of urea and ammonia removal. For instance, it is 30 times more efficient than the standard urease-ammonium adsorbent system.