Pancreatic islet microencapsulation and localized delivery of immunomodulatory molecules may improve islet transplantation outcomes in type-1 diabetes (T1D) patients by preventing allograft rejection and maintaining metabolic control without chronic and systemic immunosuppression. Here, we encapsulated human islets (HIs) in poly(ethylene glycol) conformal coating (CC), by mixing HI with minimally crosslinked 8a-PEG-maleimide and 36.2% (w/v) HS-PEG-SH, extruded through a custom fluidic device (Biorep) using a PPG+10%Span80 external oil solution and a 1.65mg/ml DTT/PPG gelling emulsion. We measured in vitro functionality through dynamic GSIS and insulin ELISA (Mercodia), and in vivo by glucose monitoring of diabetic NOD-scid mice transplanted with 2000 IEQ of CC-His in their fat pad. Biocompatibility was assessed after tissue explantation through histological and immunofluorescence evaluation using DAPI and mac2 antibodies. Micelles and nanofibers nanoparticles were made of PEG-poly(propylene sulfide) and PEG-oligo(ethylene sulfide) di-block copolymers, respectively. We tested 5 and 10 µg/mL Dex-nanoparticles inhibition of Raw264.7 macrophage cytokine production after lipopolysaccharide stimulation (ELISA), and studied whether 1mg/Kg Dex-nanoparticles improve CC biocompatibility in vivo 21 days post CC transplantation. We found that CC HIs maintain physiological insulin secretion in vitro and in vivo. However, their biocompatibility in vivo is decreased by the presence of macrophages. We demonstrated that Dexamethasone micelles and nanofibers are efficient in decreasing inflammatory cytokines in vitro, however mac-2+ cells are around CC capsules even if treatment is present.