Encapsulation of three forms of lactoferrin (Lf) (apo-, native- and holo-) was undertaken using the novel impinging aerosol technique (Progel). The micro-gel particles were produced from a 2% (w/w) solution of Lf and alginate (at equal mixing ratio) using 0.1 M CaCl2 as the cross-linking solution. An encapsulation efficiency of 68–88% was achieved based on the total amount of Lf entrapped in alginate micro-gel matrix. Increasing the CaCl2 concentration to 0.2 M reduced the encapsulation efficiency. An in-vitro digestion study conducted in simulated gastric fluid (SGF) and intestinal fluid (SIF) used pepsin and pancreatin (porcine) enzymes, respectively. Lf encapsulated micro-gel particles were able to retain significantly higher amount (76–89%) of Lf (apo- and native-forms) when digested in the SGF for 2 h as compared to their corresponding un-encapsulated pure Lf (41–58%). The effect of encapsulation on digestibility in SGF of holo-Lf was minimal. Digestion of all forms of Lf, pure or encapsulated, in the SIF was very rapid. Within 10 min, apo- and native-Lf were completely digested, while holo-Lf, exhibited some resistance as less than 5% remained after 10 min. This study showed that encapsulating apo- and native-Lf in alginate micro-gel particles can provide protection from the action of pepsin in the SGF and allow their releases in the SIF.