This study utilized the Seahorse Analyzer to examine the effect of the bile acid ursodeoxycholic acid (UDCA), on the morphology, swelling, stability, and size of novel microencapsulated β-cells, in real-time. UDCA was conjugated with fluorescent compounds, and its partitioning within the microcapsules was examined using confocal microscopy. UDCA produced microcapsules with good morphology, better mechanical strength (p < 0.01), and reduced swelling properties (p < 0.01), but lower cell viability (p < 0.05) and cell count per microcapsule (p < 0.01). UDCA reduced the cells’ biochemical activities, mitochondrial respiration, and energy production, post-microencapsulation. This is the first time biological functions of microencapsulated β-cells have been analyzed in real-time.