Neural-interfaced prostheses aim to restore sensorimotor limb functions in amputees. They rely on bidirectional neural interfaces, which represent the communication bridge between nervous system and neuroprosthetic device by controlling its movements and evoking sensory feedback. Compared to extraneural electrodes (i.e., epineural and perineural implants), intraneural electrodes, implanted within peripheral nerves, have higher selectivity and specificity of neural signal recording and nerve stimulation. However, being implanted in the nerve, their main limitation is represented by the significant inflammatory response that the body mounts around the probe, known as Foreign Body Reaction (FBR), which may hinder their rapid clinical translation. Furthermore, the mechanical mismatch between the consistency of the device and the surrounding neural tissue may contribute to exacerbate the inflammatory state. The FBR is a non-specific reaction of the host immune system to a foreign material. It is characterized by an early inflammatory phase eventually leading to the formation of a fibrotic capsule around intraneural interfaces, which increases the electrical impedance over time and reduces the chronic interface biocompatibility and functionality. Thus, the future in the reduction and control of the FBR relies on innovative biomedical strategies for the fabrication of next-generation neural interfaces, such as the development of more suitable designs of the device with smaller size, appropriate stiffness and novel conductive and biomimetic coatings for improving their long-term stability and performance. Here, we present and critically discuss the latest biomedical approaches from material chemistry and tissue engineering for controlling and mitigating the FBR in chronic neural implants.