A new microencapsulation technique is presented in which cholesteryl nonanoate (CN)/poly(methyl methacrylate) (PMMA) microcapsules are produced by the induction of phase separation between CN and PMMA within the droplets during the polymerization. The concentration of CN is the most important factor determining the final morphology of the microcapsules. For example, a polynuclear type is obtained at a low concentration (<20 wt %), a mononuclear type is obtained at a medium concentration (20-30 wt %), and an irregular phase is obtained at a high concentration (>40 wt %). To evaluate the effectiveness of the technique for stabilizing an unstable drug, we selected retinol (vitamin A) as a model drug and loaded it into the CN/PMMA microcapsules. We used a process called solute codiffusion, in which a fine solvent emulsion containing the retinol was diffused uniformly into the CN/PMMA microcapsules. The loading efficiency of retinol was predicted successfully with the aid of a thermodynamic equation. In the thermal stability test of retinol, we found that an effective association with the CN phase was the most important factor determining the limit of its molecular stability. The technique reported in this article has great potential for the microencapsulation of soft materials via a simple process and for the stabilization of unstable drugs. (C) 2004 Wiley Periodicals, Inc.