Human embryonic stem cells (hESC) are emerging as an attractive alternative source for cell replacement therapy since they can be expanded in culture indefinitely and differentiated to any cell types in the body. Various types of biomaterials have also been used in stem cell cultures to provide a microenvironment mimicking the stem cell niche(1-3). The latter is important for promoting cell-to-cell interaction, cell proliferation, and differentiation into specific lineages as well as tissue organization by providing a three-dimensional (3D) environment(4) such as encapsulation. The principle of cell encapsulation involves entrapment of living cells within the confines of semi-permeable membranes in 3D cultures(2). These membranes allow for the exchange of nutrients, oxygen and stimuli across the membranes, whereas antibodies and immune cells from the host that are larger than the capsule pore size are excluded(5). Here, we present an approach to culture and differentiate hESC DA neurons in a 3D microenvironment using alginate microcapsules. We have modified the culture conditions(2) to enhance the viability of encapsulated hESC. We have previously shown that the addition of p160-Rho-associated coiled-coil kinase (ROCK) inhibitor, Y-27632 and human fetal fibroblast-conditioned serum replacement medium (hFF-CM) to the 3D platform significantly enhanced the viability of encapsulated hESC in which the cells expressed definitive endoderm marker genes(1). We have now used this 3D platform for the propagation of hESC and efficient differentiation to DA neurons. Protein and gene expression analyses after the final stage of DA neuronal differentiation showed an increased expression of tyrosine hydroxylase (TH), a marker for DA neurons, >100 folds after 2 weeks. We hypothesized that our 3D platform using alginate microcapsules may be useful to study the proliferation and directed differentiation of hESC to various lineages. This 3D system also allows the separation of feeder cells from hESC during the process of differentiation and also has potential for immune-isolation during transplantation in the future.