In general, the encapsulated flavour powders are produced in water soluble form. In these products, the flavour volatiles are released during dissolution or hydration in water. The purpose of this research work was to develop a method to produce water insoluble capsules which are relatively shear resistant. The lemon oil was used as a model flavour compound and sodium caseinate was the wall material. The efficiency of encapsulation and losses of volatiles were monitored during the processing steps which involve precipitation, separation and drying. Five levels of lemon oil (5, 10, 15, 20 and 25% of total solids, w/w) were emulsified in sodium caseinate, followed by precipitation of emulsion at pH 4.5. The wet precipitate granules were fluidized bed dried to obtain the encapsulated product in dry granular form. The retention of lemon flavor in dried capsule was maximum (77.5% total oil) at 15% oil level. The total oil retained in the encapsulated powder granules from precipitation method were comparable to that retained by the conventional spray drying method which produces water soluble encapsulated powder.