Neural electrodes are designed to interface with the nervous system and provide control signals for neural prostheses. However, robust and reliable chronic recording and stimulation remains a challenge for neural electrodes. Here, a novel method for the fabrication of soft, low impedance, high charge density, and controlled releasing nanobiomaterials that can be used for the surface modification of neural microelectrodes to stabilize the electrode/tissue interface is reported. The fabrication process includes electrospinning of anti-inflammatory drug-incorporated biodegradable nanofibers, encapsulation of these nanofibers by an alginate hydrogel layer, followed by electrochemical polymerization of conducting polymers around the electrospun drug-loaded nanofibers to form nanotubes and within the alginate hydrogel scaffold to form cloud-like nanostructures. The three-dimensional conducting polymer nanostructures significantly decrease the electrode impedance and increase the charge capacity density. Dexamethasone release profiles show that the alginate hydrogel coating slows down the release of the drug, significantly reducing the burst effect. These multifunctional materials are expected to be of interest for a variety of electrode/tissue interfaces in biomedical devices.