A method was developed to prepare two forms of microencapsulated mixture of ferrous sulphate and ascorbic acid. In the first form, the mix was coated with sodium alginate (MFS), and in the second the mix was coated by two layers of lecithin and sodium alginate (MLFS). The stability of these two forms of microencapsulated iron was examined under different processing conditions and in artificial gastric juice and bile solution. Yoghurt milk was fortified with different iron sources namely; ferrous sulphate (FS), MFS and MLFS to give 0, 4, 7 and 10 mg ironl100 g of ohurt. The activity of yoghurt starter as will as lipid oxidation and sensory characteristics of the resultant yoghurt were followed during cold storage. Results showed that MLFS was stable to salt, sugars, heat treatment (80 or 90°CI‘lO min) and acidity ( up to pH 4 for 7 days) as compared with MFS. The oxidative stability of butter oil containing encapsulated iron especially MLFS was higher than that containing FS. Microencapsulated iron decomposed with bile salt and exhibited lower stability at pH 1.5 than at pH 3 during exposure to artificial gastric juice. The activity of yoghurt starter was not affected by the concentration or the source of iron. No significant increases in RV and TBA were found in yoghurt containing microencapsulated iron as compared with FS fortification. Microencapsulated iron had no significant effect on sensory properties of yoghurt, while non-encapsulated iron (FS) caused significant increase in oxidized and metallic flavour of yoghurt.