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Alzheimer's disease (AD) is the most prevalent neurodegenerative disease in the elderly population. AD currently affects approximately 27 million people worldwide. A pathological hallmark of AD is the accumulation and deposition of the amyloid beta (Aβ) peptide in neuritic plaques and cerebral blood vessels in the brain. The amyloid cascade hypothesis postulates that any treatment reducing the production of Aβ or facilitating its clearance is likely to prevent or delay cognitive decline. Passive immunization with anti-Aβ antibodies constitutes a promising therapeutic approach for the treatment of AD. Injected anti-Aβ antibodies can slow cognitive decline and decrease Aβ burden. However, Fc-induced responses and high costs of the treatment remain a concern for its wide use in AD patients. Here we report the use of a novel passive immunotherapy approach based on the intracerebral implantation of encapsulated myoblasts genetically engineered to chronically release single-chain Fv antibody fragments (scFv) targeted to the EFRH N-terminus peptide of Aβ, adjacent to the BACE1 secretase cleavage site. Implantation of permeable capsules containing scFV-secreting myoblasts into the brain prevented the production and aggregation of Aβ in the APP23 transgenic AD mouse model, by binding to soluble Aβ species, and interfering with the BACE1 cleavage of huAPP. Functional effects six-month post-implantation in mice showed significant behavioral recovery in anxiety and memory traits. 1H MRS spectroscopy indicated that reduced levels of phosphocholine in the hippocampus following scFv-capsule therapy were preventing neuronal cell membrane disruption. The present work demonstrates the principle of cell encapsulation technology for in situ chronic delivery of antibodies in the CNS and its potential application for AD, and opens the possibility for its use in peripheral antibody delivery. This novel technique could also benefit the various diseases presently treated by antibody administration.