The present invention relates to compositions comprising at least one in vitro-developed β-cell and a CXCL12 polypeptide encapsulated in a microcapsule. The invention further relates to methods for treating diabetes, accelerating the normalization of hyperglycemia, and preventing fibrotic pericapsular overgrowth of microcapsules using transplanted human stem cell-derived β cells co-encapsulated with a CXCL12 polypeptide.