This study investigated the model-based design, fabrication and in vitro and in vivo experimental characterization of a pancreatic substitute consisting of mouse insulinoma cells encapsulated in agarose in a disk-shaped construct. Two construct prototypes were examined: (i) a single disk construct comprised of agarose and βTC3 cells; and (ii) a buffered disk construct, consisting of agarose and βTC3 cells, coated with an additional layer of pure agarose. Diffusional studies of glucose and insulin were performed to characterize the transport properties of the material. Three dimensional oxygen diffusion-reaction models were used to predict the appropriate cell loadings for the two construct prototypes under varying external oxygen tensions. In vitro and in vivo experiments found the overall viable cell number for each construct prototype plateaued to the same value, regardless of the initial cell seeding number, when constructs were placed under identical environmental conditions. Furthermore, mathematical model calculations correlated well with experimental in vitro and in vivo results of cell viability, indicating oxygen tension to be the dominating factor in establishing total viable cell number in these constructs. These results indicate that modeling is useful for the development of tissue engineered constructs when permissive matrices and continuous cell lines are used. The applicability of this modeling and experimental methodology in the development of agarose-based constructs for use as a bioartificial pancreas is discussed.