We report the fabrication of in-line photonic microcells (PMCs) by encapsulating tapered microfibers (MFs) inside glass tubes. The encapsulation isolates MFs from external environment and makes them more suitable for real-world applications. Based on PMCs with encapsulated highly birefringent (Hi-Bi) MFs, we demonstrated pressure, temperature and refractive index (RI) sensors as well as long period grating devices. A fiber Sagnac loop interferometer incorporating a Hi-Bi microfiber PMC demonstrated RI sensitivity of 2024 nm per RI unit (nm/RIU) in gaseous environment and 21231 nm/RIU in water.