The water-reactive tissue adhesive 2-octyl cyanoacrylate (OCA) was microencapsulated in polyurethane shells and incorporated into Palacos R bone cement. The tensile and compressive properties of the composite material were investigated in accordance with commercial standards, and fracture toughness of the capsule-embedded bone cement was measured using the tapered double-cantilever beam geometry. Viability and proliferation of MG63 human osteosarcoma cells after culture with extracts from Palacos R bone cement, capsule-embedded Palacos R bone cement, and OCA were also analyzed. Incorporating up to 5 wt % capsules had little effect on the compressive and tensile properties of the composite, but greater than 5 wt % capsules reduced these values below commercial standards. Fracture toughness was increased by 13% through the incorporation of 3 wt % capsules and eventually decreased below the toughness of the capsule-free controls at capsule contents of 15 wt % and higher. The effect on cell proliferation and viability in response to extracts prepared from capsule-embedded and commercial bone cements were not significantly different from each other, whereas extracts from OCA were moderately toxic to cells. Overall, the addition of lower wt % of OCA-containing microcapsules to commercial bone cement was found to moderately increase static mechanical properties without increasing the toxicity of the material. © 2013 Wiley Periodicals, Inc. J Biomed Mater Res Part B: Appl Biomater, 102B: 181–189, 2014.