Our group has previously created a functional neointestine that is capable of restoring absorptive function. However, the endogenous level of vascular endothelial growth factor (VEGF) is markedly reduced in the construct compared to native bowel. Therefore, we wanted to locally deliver VEGF in a sustained fashion to upregulate angiogenesis in the neointestine. Rat recombinant VEGF was encapsulated in poly(lactide-co-glycolide) microspheres by a double emulsion method. Release kinetics and bioactivity were determined in vitro. Tissue-engineered intestine was generated by seeding donor neonatal rat intestinal organoid units onto a biodegradable polyglycolic acid scaffold along with VEGF-containing or empty microspheres, and wrapped in the omentum of recipient rats. After 4 weeks, the neointestinal cysts were analyzed for morphometry, VEGF levels, epithelial proliferation, and capillary density. Sustained release of biologically active VEGF was confirmed by in vitro studies. Intestinal constructs with VEGF microspheres were significantly larger than those containing empty microspheres. Tissue VEGF levels were significantly higher in neointestine loaded with encapsulated VEGF compared to those without growth factor. Epithelial cellular proliferation and capillary density were significantly increased in the VEGF-containing neointestinal constructs compared to empty constructs. Tissue-engineered intestine responds to sustained delivery of VEGF by upregulating microvasculature and epithelial proliferation.