Alginate/poly-L-ornithine/alginate (APA) coherent microencapsulation, which provides an immunoselective and highly biocompatible membrane, creates a viable option for cellular or tissue transplantation. This study explored the potential of incorporating immunosuppressive drugs onto the capsule surface to provide local immunosuppression in addition to immunoisolation. A thorough investigation has been conducted to optimize and characterize alginate biotinylation via carbodiimide chemistry by a 4'-hydroxyazobenzene-2-carboxylic acid (HABA) based assay and by ATR-FTIR, H-NMR and XPS. To minimize the formation of by-product, a theoretical 40% activation of the carboxylic group on the alginate was employed to manufacture an optimal modification of similar to 10% biotinylated alginate. Confocal fluorescence microscopy was used to assess the conjugation of streptavidin and assembly of antibodies on the microcapsules. Local immunosuppressive capacity was assimilated on the APA microcapsules by binding of anti-tumour necrosis factor-alpha (TNF-alpha) antibodies via streptavidin-biotin conjugation, shown from the clear reduction of TNF-alpha in in-vitro medium.