Cyanobacteria inhabit nearly every ecosystem on earth, play a vital role in nutrient cycling, and are useful as model organisms for fundamental research in photosynthesis and carbon and nitrogen fixation. In addition, they are important for several established biotechnologies for producing food additives, nutritional and pharmaceutical compounds, and pigments, as well as emerging biotechnologies for biofuels and other products. Encapsulation of living cyanobacteria into a porous silica gel matrix is a recent approach that may dramatically improve the efficiency of certain production processes by retaining the biomass within the reactor and modifying cellular metabolism in helpful ways. Although encapsulation has been explored empirically in the last two decades for a variety of cell types, many challenges remain to achieving optimal encapsulation of cyanobacteria in silica gel. Recent evidence with Synechocystis sp. PCC 6803, for example, suggests that several unknown or uncharacterized proteins are dramatically upregulated as a result of encapsulation. Also, additives commonly used to ease stresses of encapsulating living cells, such as glycerol, have detrimental impacts on photosynthesis in cyanobacteria. This mini-review is intended to address the current status of research on silica sol-gel encapsulation of cyanobacteria and research areas that may further the development of this approach for biotechnology applications.