We developed agarose microcapsules with a single hollow core templated by alginate microparticles using a jet-technique. We extruded an agarose aqueous solution containing suspended alginate microparticles into a coflowing stream of liquid paraffin and controlled the diameter of the agarose microparticles by changing the flow rate of the liquid paraffin. Subsequent degradation of the inner alginate microparticles using alginate lyase resulted in the hollow-core structure. We successfully obtained agarose microcapsules with 20–50 µm of agarose gel layer thickness and hollow cores ranging in diameter from ca. 50 to 450 µm. Using alginate microparticles of ca. 150 µm in diameter and enclosing feline kidney cells, we were able to create cell-enclosing agarose microcapsules with a hollow core of ca. 150 µm in diameter. The cells in these microcapsules grew much faster than those in alginate microparticles. In addition, we enclosed mouse embryonic stem cells in agarose microcapsules. The embryonic stem cells began to self-aggregate in the core just after encapsulation, and subsequently grew and formed embryoid body-like spherical tissues in the hollow core of the microcapsules. These results show that our novel microcapsule production technique and the resultant microcapsules have potential for tissue engineering, cell therapy and biopharmaceutical applications. Biotechnol. Bioeng. 2008;99: 235–243. © 2007 Wiley Periodicals, Inc.