Pulmonary arterial hypertension (PAH) is triggered by pulmonary vascular endothelial cell apoptosis and microvascular loss. Therefore, therapies that can regenerate lost vasculature may offer therapeutic benefit. Endothelial colony-forming cells (ECFCs) can directly repair damaged blood vessels and may have therapeutic potential for the treatment of PAH. However, poor retention of ECFCs in the lungs following intravenous delivery greatly limits their therapeutic application. Therefore, we studied whether cellular microencapsulation could enhance retention in the lung after systemic delivery and improve therapeutic efficacy of ECFCs in a rat monocrotaline (MCT) PAH model. ECFCs were encapsulated by vortex emulsion using various concentrations of agarose, and initial cell viability was assessed. Encapsulated and free ECFCs were transduced with luciferase and administered to Sprague-Dawley rats 3 days after injection of MCT. In vivo ECFC persistence and bio-distribution was assessed by bioluminescence imaging (BLI). At the end of the study, right ventricular systolic pressure (RVSP) and right ventricular hypertrophy were assessed for therapeutic efficacy. Microgel encapsulation using 3.5% agarose improved cell survival and supported cell migration from capsules. At 15 minutes after delivery, BLI radiance was similar for free and microencapsulated ECFCs. However, only encapsulated cells could be detected by BLI at 4 and 24 hours. Transplantation of microencapsulated ECFCs led to significant improvement in RVSP 3 weeks after delivery compared with nonencapsulated ECFCs. Together, microencapsulation increased retention of ECFCs within the lungs. Furthermore, even a modest increase in ECFC persistence over 24 hours can provide an important therapeutic benefit in the rat MCT model of PAH.