Controlled expression of glial cell line derived neurotrophic factor (Gdnf) can be integrated in the development of a system for repair of injured peripheral nerves. This delivery strategy was demonstrated via inducible Gdnf from microencapsulated cells in barium alginate. The Schwann cell line RT4-D6P2T was initially modified utilizing an ecdysone-based stable transfection system to produce RT4-Gdnf cells. During construct preparation, it was found that C6 cells (where Gdnf cDNA was isolated) make three Gdnf transcript variants. Additionally, the importance of 5' untranslated region to drive biologically-functional Gdnf synthesis was shown. Encapsulation of RT4-Gdnf in 1% alginate was then performed. It was determined that cells were able to survive at least 1 month in vitro using starting densities of 20, 200 and 2000 cells/capsule and barium ion concentrations of 10, 50, 100 and 200 mM. Most importantly, encapsulated cells secreted exogenous Gdnf upon ponasterone A induction. Mixture of basement membrane extract Matrigel to alginate promoted increased proliferation, cell spreading and Gdnf release. Finally, compression tests showed that cell-loaded microcapsules fractured at 75% diameter compression with 38 kPa of stress. Regulated Gdnf release from these microcapsules in vivo may potentially aid in the regeneration of damaged nerves.