Recent success in clinical hepatocyte transplantation therapy has encouraged further investigation into bioengineering hepatic tissues in vivo. Engineering tissues in the subcutaneous space is an attractive method; however, hepatocyte survival has been transient due to insufficient vascular network formation. To establish a vascularized cavity, we created a polyethylene terephthalate mesh device coated with poly(vinylalcohol) that allowed for the gradual release of basic fibroblast growth factor (bFGF), a potent angiogenic factor. The efficacy of the bFGF-releasing device in inducing vascular network formation in the subcutaneous space was observed in mouse and rat studies. Isolated mouse hepatocytes transplanted into newly vascularized subcutaneous cavities allowed for persistent survival up to 120 days. In the absence of a vascularized compartment, the survival of the transplanted hepatocytes was markedly diminished. Functional maintenance of the engineered hepatic tissues was confirmed by high expression of liver-specific mRNAs and proteins. These engineered hepatic tissues have the ability to take up inoculated compounds and express strong induction of drug-metabolizing enzymes, demonstrating functional relevance as a metabolic tissue. In conclusion, we have created a novel technology to engineer functionally active hepatic tissues in the subcutaneous space, which will likely facilitate hepatocyte-based therapies.