Microencapsulated islets are usually injected free-floating into the peritoneal cavity, so the position of the grafts remains elusive after transplantation. This study aims to assess magnetic resonance imaging (MRI) as a noninvasive means to track microencapsulated insulin producing cells following transplantation. Encapsulated insulin producing cells (MIN6 and human islets) were labelled with magnetic microspheres (MM), assessed for viability and insulin secretion, and imaged in vitro using a clinical grade 3 T MRI and in vivo using both clinical grade 3 T and research grade 11.7 T MRI. Fluorescent imaging demonstrated the uptake of MM by both MIN6 and human islets with no changes in cell morphology and viability. MM labelling did not affect the glucose responsiveness of encapsulated MIN6 and islets in vitro. In vivo encapsulated MM-labelled MIN6 normalized sugar levels when transplanted into diabetic mice. In vitro MRI demonstrated that single microcapsules as well as clusters of encapsulated MM-labelled cells could be visualised clearly in agarose gel phantoms. In vivo encapsulated MM-labelled MIN6 could be visualised more clearly within the peritoneal cavity as discrete hypointensities using the high power 11.7 T but not the clinical grade 3 T MRI. This study demonstrates a method to noninvasively track encapsulated insulin producing cells by MM labelling and MRI.