Engineering liver tissue using hepatocyte transplantation may provide a new approach for treating a variety of liver diseases. However, techniques to transplant hepatocytes and promote their survival must be developed. We have developed systems to transplant hepatocytes on highly porous (95%), biodegradable sponges, and to regulate the survival of cultured hepatocytes by releasing specific growth factors in the cellular environment. Sponges were fabricated from poly (L, lactic acid) (PLLA) and polyvinyl alcohol using a particulate leaching technique. Epidermal growth factor and insulin, critical factors for hepatocyte growth and survival in culture, were incorporated into microspheres fabricated from poly (lactic-co-glycolic acid) (PLGA) utilizing a double emulsion technique. The incorporated factors were released in a controlled manner over one month in vitro, and the released factors maintained their biological activity, as measured by their ability to promote hepatocyte growth and survival in culture. The growth factor-containing microspheres could be transplanted with hepatocytes using the porous sponges, and the localized, sustained release of these factors improved hepatocyte engraftment 2-fold. These studies suggest that hepatocyte containing tissues can be engineered using cell transplantation, and that regulating the microenvironment of transplanted cells can control their engraftment.