Injectable peptide and oligonucleotide biotherapeutics offer great promise for treatment of serious chronic diseases but almost always need further formulation work to increase stability and circulation lifetimes. Covalent attachment of poly(ethylene glycol) (PEG) will increase circulation lifetimes up to a week or so and decrease degradation in favorable cases. Encapsulation in biodegradable polymer microparticles has been highly successful, mostly for peptides to provide sustained release up to several months after injection. Although products are on the market using these technologies, PEGylation and microparticle encapsulation each have drawbacks that prevent more widespread use. When they are combined, the limitations of one technology may be resolved by the other. Work in several laboratories on encapsulation of PEGylated bioactive molecules has revealed a synergy. Activity reduction and restricted circulation lifetimes for PEGylated bioactive agents is addressed by microencapsulation and using a lower PEG molecular weight. Chemical degradation, excessive burst release and limited drug content are typical problems for microparticles that are ameliorated by using PEGylated actives. The case for synergy between PEGylation and microencapsulation is illustrated in this review by work with several proteins and peptides including insulin, and the oligonucleotide therapeutic, pegaptanib.