Designing biocompatible materials to encapsulate xenogeneic insulin-releasing β-cells for transplantation has been considered as a promising alternative to avoid the immunosuppression and drawbacks of the treatment of Type 1 diabetes mellitus (T1D) by direct islet transplantation. The current work for the first time studied a hybrid alginate@TiO2 microcapsule as a reservoir for rat insulinoma-derived INS-1E cells, as a β-cell surrogate, towards the treatment of T1D. The hybrid microcapsule is composed of an alginate core as a biocompatible matrix for cell encapsulation and a crack-free TiO2 shell as a semipermeable membrane to prevent cell leakage, protect encapsulated cells from immune attacks, as well as allow the diffusion of nutrients and the secretion of insulin. Compared to most-commonly used pure alginate microcapsules, the insulin-secreting INS-1E cells encapsulated in our alginate@TiO2 microcapsules revealed higher metabolic activity and maintained the insulin secretion over more than 6 weeks. This study highlights that our designed alginate@TiO2 hybrid microcapsules can serve as an ideal reservoir for cell encapsulation towards the treatment of T1D, thus further promoting the development of artificial organs for cell therapy.