Artificial cells containing concentrated hemoglobin (Hb) solution were prepared by interfacial polymerization of Hb with glutaraldehyde (GA) in liquid membrane capsules (LMC). A solution containing 30% of Hb was emulsified in mineral oil as red cell-size microdroplets, and this emulsion was dispersed in an aqueous phase containing glutaraldehyde to form LMC. The LMC were semipermeable templates that held the microdroplets of Hb in suspension while GA diffused through the oil to the microdroplet surfaces. The GA crosslinked Hb at the surface of each microdroplet to form an artificial red-cell membrane encapsulating Hb solution. A water-soluble surfactant was used to eject the cells from the LMC and suspend them in saline. Several surfactants were evaluated. Cell size was controlled by agitation speed during preparation of the original emulsion. Cells of 2.52 = +/- 1.69 micron were prepared. The encapsulated Hb retained capacity to bind and release O2. The cells had a P50 of 8.9 torr (1200 Pa) and a capacity of 0.55 cc O2/g of total Hb, indicating that the crosslinked portion of the Hb did not contribute to O2 transport.