Throughout the past ten years, comprehensive understanding of fundamental and applied research has focused on functional coating and specifically on micro-encapsulaion. In this study, weak polycation poly(allylamine hydrochloride) and strong polyanion poly(sodium styrene sulfonate) were used for fabrication of nano film through layer by layer technique on the surface of disperse dye particles. Then micron-sized particles were surrounded by poly(urea formaldehyde) using in-situ polymerization. Chemical structure, surface morphology, and size distribution of these novel microcapsules were characterized by Fourier transform infrared spectrometry, differential scanning calorimetry, optical microscopy, and scanning electronic microscopy. Size and surface morphology of the microcapsules can be optimized by selecting proper weight ratio of urea to formaldehyde and core to shell material type, and amount of surfactant and agitation rate. This technology demonstrated good capability in several applications in textile industry, such as dying fabrics because of saving huge amount of water and showing slow-release property of dye without using dye assistant agents. (C) 2010 Wiley Periodicals, Inc. J Appl Polym Sci 119: 586-594, 2011