In an effort to develop an encapsulated cell-based system to deliver arylsulfatase A (ARSA) to the central nervous system of metachromatic leukodystrophy (MLD) patients, we engineered C2C12 mouse myoblasts with a retroviral vector containing a full-length human ARSA cDNA and evaluated the efficacy of the recombinant secreted enzyme to revert the MLD phenotype in oligodendrocytes (OL) of the As2-/- mouse model. After transduction, C2C12 cells showed a fifteen-fold increase in intracellular ARSA activity and five-fold increase in ARSA secretion. The secreted hARSA collected from transduced cells encapsulated in polyether-sulfone polymer, was taken up by enzyme-deficient OL derived from MLD mice and normally sorted to the lysosomal compartment, where transferred enzyme reached 80% of physiological levels, restoring the metabolism of sulfatide. To evaluate whether secreted enzyme could restore metabolic function in the brain, encapsulated cells and secreted ARSA were shown to be stable in CSF in vitro. Further, to test cell viability and enzyme release in vivo, encapsulated cells were implanted subcutaneously on the dorsal flank of DBA/2J mice. One month later, all retrieved implants released hARSA at rates similar to unencapsulated cells and contained well preserved myoblasts, demonstrating that encapsulation maintains differentiation of C2C12 cells, stable transgene expression and long-term cell viability in vivo. Thus, these results show the promising potential of developing an ARSA delivery system to the CNS based on the use of a polymer-encapsulated transduced xenogenic cell line for gene therapy of MLD.