Compressed air energy storage is a useful means of storage since the stored compressed air can be used at any time as a source of mechanical energy for power production. However, if the heat generated during compression is not utilized, the process efficiency will be low, and consequently, additional heat is required to avoid frost formation during the expansion process. The generated heat during compression can be stored in the form of sensible heat in the wall of the high-pressure tank at an elevated temperature. However, this method is undesirable due to (1) less air can be compressed at higher temperatures and (2) heavy insulation would be required to prevent heat loss to the environment over extended time. A solution to this problem is to use Phase Change Material (PCM) which has a melting temperature close to ambient, and hence the heat could be stored as latent heat of melting. PCMs have low thermal conductivity and hence requires to have large contact area with the compressed air so as to be able to release its latent heat rapidly during rapid expansion. This could be achieved through the use of microencapsulated PCM, which provides very large surface area. In this work, a high-pressure tank (2 L, 200 bar) was used for air storage while the commercial microcapsules; Micronal (R) DS 5038X was used as the latent heat storage material. Both theoretical simulation and experimental measurements made on the system show that the use of PCM microcapsules reduces the maximum increase in air temperature from approximately 45 degrees C to 27 degrees C (150 g, Micronal (R) DS 5038X) during charging. While during discharging, the maximum decrease in temperature was reduced from 48 degrees C to 28 degrees C, which prevented air temperature from dropping to below 0 degrees C.