To explore the effects immune‐isolating encapsulation has on the insulin secretion of pancreatic islets and to improve our ability to quantitatively describe the glucose‐stimulated insulin release (GSIR) of pancreatic islets, we conducted dynamic perifusion experiments with isolated human islets. Free (unencapsulated) and hydrogel encapsulated islets were perifused, in parallel, using an automated multi‐channel system that allows sample collection with high temporal resolution. Results indicated that free human islets secrete less insulin per unit mass or islet equivalent (IEQ) than murine islets and with a less pronounced first‐phase peak. While small microcapsules (d = 700 µm) caused only a slightly delayed and blunted first‐phase insulin response compared to unencapsulated islets, larger capsules (d = 1,800 µm) completely blunted the first‐phase peak and decreased the total amount of insulin released. Experimentally obtained insulin time‐profiles were fitted with our complex insulin secretion computational model. This allowed further fine‐tuning of the hormone‐release parameters of this model, which was implemented in COMSOL Multiphysics to couple hormone secretion and nutrient consumption kinetics with diffusive and convective transport. The results of these GSIR experiments, which were also supported by computational modeling, indicate that larger capsules unavoidably lead to dampening of the first‐phase insulin response and to a sustained‐release type insulin secretion that can only slowly respond to changes in glucose concentration. Bioartificial pancreas type devices can provide long‐term and physiologically desirable solutions only if immunoisolation and biocompatibility considerations are integrated with optimized nutrient diffusion and insulin release characteristics by design.