A fundamental understanding of the in vivo biodegradation phenomenon as well as an appreciation of cellular and tissue responses which determine the biocompatibility of biodegradable PLA and PLGA microspheres are important components in the design and development of biodegradable microspheres containing bioactive agents for therapeutic application. This chapter is a critical review of biodegradation, biocompatibility and tissue/material interactions, and selected examples of PLA and PLGA microsphere controlled release systems. Emphasis is placed on polymer and microsphere characteristics which modulate the degradation behaviour and the foreign body reaction to the microspheres. Selected examples presented in the chapter include microspheres incorporating bone morphogenetic protein (BMP) and leuprorelin acetate as well as applications or interactions with the eye, central nervous system, and lymphoid tissue and their relevance to vaccine development. A subsection on nanoparticles and nanospheres is also included. The chapter emphasizes biodegradation and biocompatibility; bioactive agent release characteristics of various systems have not been included except where significant biodegradation and biocompatibility information have been provided.