This invention is directed to a composition comprising encapsulated expandable polymeric microparticles including expandable base microparticles encapsulated in a shell of at least one layer of a labile or degradable encapsulation material. The encapsulated microparticles have an unexpanded volume average particle size diameter of from about 0.05 to about 5,000 microns. The invention is further directed to the use of the composition for modifying the permeability of subterranean formations and increasing the mobilization and/or recovery rate of hydrocarbon fluids present in the formations.