The transient deformation of cylindrical liquid-filled capsules with elastic membranes is studied in simple shear flow at small and moderate Reynolds numbers. The aim of the study is to investigate the inertia effect on the deformation of elastic capsules and the flow structure around them. The simulation is based on a hybrid method which introduces the immersed boundary concept in the framework of the multi-block lattice Boltzmann model. The deformation of capsules with circular and elliptical resting shapes is studied; the membrane constitutive model is Hooke’s law. However, the present model can be implemented to capsules with arbitrary resting configurations and constitutive laws. The simulation results show that inertia has important effect on the transient deformation process, steady configuration and tank treading frequency of a capsule in simple shear flow; Inertia also significantly affects the flow structure and vorticity field around and inside a capsule.