Disclosed is a process for damage-free encapsulation of a variety of core materials including viable cells. The core material is suspended in an aqueous solution of a polymeric material containing cationic groups such as an aminated glucopolysaccharide, e.g. chitosan. A temporary matrix is formed by gelling droplets of the suspension with a divalent or multivalent anion. The temporary matrix is permanently cross-linked with a polymeric material containing plural anionic groups, e.g., polyaspartic or polyglutamic acid, to form a semipermeable membrane. The interior of the microcapsule may be resolublized by subjecting the capsule to a solution of low molecular weight cations. The process produces microcapsules which are not sticky, do not clump and allow viable cell growth and proliferation.