Abstract: Islet transplantation is one of the effective therapies for diabetes mellitus. Nevertheless, multiple issues still exist, such as shortage of donors and adverse reactions caused by long-term use of immunosuppressants, which limit the islet survival post-transplantation. Microencapsulated islet transplantation may overcome these difficulties to certain extent, whereas many factors, such as the destruction of immune isolation microenvironment within the microcapsules and insufficient supply of oxygen and nutrients, constrain the application of microencapsulated islet transplantation in clinical practice. In recent years, how to enhance the effect of microencapsulated islet transplantation has been gradually studied. The application of stem cells in microencapsulated islet transplantation has steadily become a research hot spot. Therefore, the optimizing strategies for microencapsulated islet transplantation and the application of stem cells in microencapsulated islet transplantation were reviewed, and the potential improvement techniques of microencapsulated islet transplantation were investigated in this article, aiming to provide reference for further clinical application of microencapsulated islet transplantation.