The replacement of flexible polyolefin barrier layers with novel, thin, functional polymer coatings in the production of paperboard packaging involves the risk of deteriorated barrier and mechanical properties during the converting process. Local defects or cracks in the protective barrier layer can arise because of the stress induced in creasing and folding operations. In this study, the incorporation of microencapsulated self-healing agents in coating formulations applied both by spot- and uniform-coating techniques was studied. The preparation process of microcapsules with a hydrophobic core surrounded by a hydrophobically modified polysaccharide membrane in aqueous suspension was developed to obtain capsules fulfilling both the criteria of small capsule size and reasonably high solids content to match the requirements set on surface treatment of paperboard for enhancement of packaging functionality. The survival of the microcapsules during application and their effectiveness as self-healing agents were investigated. The results showed a reduced tendency for deteriorated barrier properties and local termination of cracks formed upon creasing. The self-healing mechanism involves the rupture of microcapsules local to the applied stress, with subsequent release of the core material. Crack propagation is hindered by plasticization of the underlying coating layer, while the increased hydrophobicity helps to maintain the barrier properties.