Intraperitoneal transplantation of hepatocytes encapsulated with calcium alginate gel produced a marked improvement in the survival rate (75%) of rats with D-galactosamine (D-gal)-induced acute hepatic failure (AHF) when compared to the rate of 50% in rats undergoing free hepatocyte transplantation (HCTX). The viability of encapsulated hepatocytes was still 70% at 36 h after transplantation, and a gradual improvement in the serum glutamic oxaloacetic transaminase (GOT) and total bilirubin values was observed after encapsulated HCTX. Moreover, the arterial blood ketone body ratio (AKBR) remained within the normal range for the whole period of the investigation (60 h after transplantation), and histological investigation of the liver at 36 h demonstrated only slight inflammatory cell infiltrates without hepatocellular necrosis. The phagocytic index rose immediately after encapsulated HCTX and remained high subsequently. A prostaglandin inhibitor, indomethacin, blocked the improvement in survival rate, serum GOT, and AKBR of rats with D-gal-induced AHF despite encapsulated HCTX. Furthermore, no increase in the phagocytic index was observed. Indomethacin apparently suppressed the activation of Kupffer cells by encapsulated HCTX, which then failed to improve the survival of rats with D-gal-induced acute hepatic failure. Our results indicate that the reticuloendothelial system seems to play an important role in the efficacy of encapsulated HCTX in rats with D-gal-induced AHF.