Implanting recombinant cells encapsulated in alginate microcapsules to secrete therapeutic proteins has been proven clinically effective in treating several murine models of human diseases. However, once implanted, these microcapsules cannot be assessed without invasive surgery. We now report the preparation and characterization of a novel ferrofluid to render these microcapsules visible with magnetic resonance imaging (MRI). The ferrofluid was prepared as a colloidal iron oxide stabilized in water by alginate. The presence of-iron particles in the ferrofluid was verified with chemical titration, dynamic light scattering, and magnetization measurement. The microcapsules fabricated with various concentrations of the ferrofluid in the core, or on the surface of alginate microcapsules, or both, all produced microcapsules with smooth surfaces as shown with light and scanning electron microscopy. However, at the nanoscale level, as revealed with atomic force microscopy, the ferrofluid-fabricated microcapsules demonstrated increased granularity, particularly when the ferrofluid was used to laminate the surface. From the force spectroscopy measurements, these modified microcapsules showed increasing surface rigidity in the following order: traditional alginate < ferrofluid in the core < ferrofluid on the surface. Although the mechanical stability of low-concentration ferrofluid (0.1%) microcapsules was reduced, increasing concentrations, up to 20%, were able to improve stability. When these ferrofluid microcapsules were examined with MRI, their T-2 relaxation time was reduced, thereby producing increased contrast readily detectable with MRI, whereas the traditional alginate microcapsules showed no difference when compared with water. In conclusion, such ferrofluid-enhanced alginate is suitable for fabricating microcapsules that offer the potential for in vivo tracking of implanted microcapsules without invasive surgery. (C) 2003 Wiley Periodicals, Inc.