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Islet encapsulation may allow transplantation without immunosuppression but thus far islets in large microcapsules transplanted in the peritoneal cavity failed to reverse diabetes in humans. We showed that islet transplantation in confined well-vascularized sites like the epididymal fat pad (EFP) improved graft outcomes, but only conformal coated (CC) islets can be implanted in these sites in curative doses. Here, we showed that CC using polyethylene glycol (PEG) and alginate (ALG) was not immunoisolating because of its high permselectivity and strong allogeneic T cell responses. We refined the CC composition and explored PEG and islet-like extracellular matrix (MG) islet encapsulation (PEG MG) to improve capsule immunoisolation by decreasing its permselectivity and immunogenicity while allowing physiological islet function. Though diabetes reversal efficiency of allogeneic but not syngeneic CC islets was lower than naked islets, we showed that CC (PEG MG) islets from fully MHC-mismatched Balb/c mice supported long-term (> 100 days) survival after transplantation into diabetic C57BL/6 recipients in the EFP site (750-1000 IEQ / mouse) in absence of immunosuppression. Lack of immune cell penetration and T cell allogeneic priming was observed. These studies support the use of CC (PEG MG) for islet encapsulation and transplantation in clinically-relevant sites without chronic immunosuppression. This article is protected by copyright. All rights reserved.