Introduction: Microencapsulation is a promising technology for protecting valuable cells and promoting secretome delivery in regenerative medicine. The current study evaluated the biocompatibility of alginate-chitosan microcapsules, loaded with xenogeneic cells, in Sprague–Dawley rats. Materials & Methods: The xenogeneic cells, human umbilical cord-derived mesenchymal stem cells, were entrapped in alginate beads (50 mg/ml) and then coated with chitosan (10 mg/ml). The microcapsules were then implanted at the intrabone marrow site, and the post-implantation effect was evaluated after 14 days. Results: The results showed that xenogeneic cell-loaded microcapsule-implanted and non-implanted rats had no significant differences in recovery post-surgery, as assessed from wound healing, body weight, and leukocyte ratios. Flow cytometric analysis of the leukocyte ratios indicated that the lymphocyte and granulocyte percentages (64.20±8.72%; 14.57±6.25% in the control group and 63.87±5.64%; 14.73±4.25% in the treatment group) were in the normal range (37.4-91.9% for lymphocytes and 5.4-64.4% for granulocytes). However, the monocyte percentages (21.22±2.48% and 21.40±1.39% in the control and treatment groups, respectively) were higher than the normal range (1.1-5.7%), which might indicate chronic inflammation in rats postoperatively. Conclusion: The abovementioned results suggested that chronic inflammation was caused by invasive surgical procedures rather than implanted microcapsules. To our knowledge, this study is the first to report the intrabone marrow implantation of biopolymer-based microcapsules in a rat model. © 2025 Universiti Putra Malaysia Press. All rights reserved.