Microcapsules are described that comprise (a) a liquid aqueous or hydrogel core; (b) a semipermeable membrane surrounding said core; (c) live animal cells (e.g., pancreatic cells) in the core; and (d) oxygen-generating particles in said core, said oxygen-generating particles included in said microcapsules in an amount sufficient to lengthen the duration of viability of said animal cells in said microcapsules. Compositions comprising such microcapsules and uses thereof, such as in treating diabetes, are also described.