The nematophagous fungus Hirsutella rhossiliensis is a common antagonist of a number of important plant-parasitic nematodes including the beet cyst nematode Heterodera schachtii. Although H. rhossiliensis is highly pathogenic, slow growth characteristics and weak competiveness under field conditions limit its biocontrol potential. Cellulose-based microcapsules were tested for their ability to improve fungal competitiveness in the soil and nematode parasitism. In a first approach microcapsules containing 15% fungal mycelium plus 15% corn gluten and 0.5% yeast extract as additives gave low levels of H. schachtii control. Fungal parasitism was not observed and indicated that nematode mortality was most likely caused by non-specific accumulation of nematicidal compounds associated with decomposition of the additives in the microcapsules. Removal of the corn gluten additive resulted in a minor increase of 20% parasitism of H. schachtii juveniles. Furthermore, the yeast extract that acted as nutrient source for the fungus diffused through the semi-permeable membrane of the capsules during the formulation process and was ineffective. Replacing the corn gluten and yeast extract with 3% autoclaved baker’s yeast and using finely dispersed mycelium instead of pelletized mycelium increased juvenile parasitism in the soil up to 90% and decreased number of juveniles per cm root length by over 80%. Cellulose-based microcapsules supplemented with autoclaved baker’s yeast, therefore, proved to be an effective delivery system for H. rhossiliensis to control H. schachtii.