Objective. The dorsal root ganglion is an attractive target for implanting neural electrode arrays that restore sensory function or provide therapy via stimulation. However, penetrating microelectrodes designed for these applications are small and deliver low currents. For long-term performance of microstimulation devices, novel coating materials are needed in part to decrease impedance values at the electrode-tissue interface and to increase charge storage capacity. Approach. Conductive polymer poly(3,4-ethylenedioxythiophene) (PEDOT) and multi-wall carbon nanotubes (CNTs) were coated on the electrode surface and doped with the anti-inflammatory drug, dexamethasone. Electrode characteristics and the tissue reaction around neural electrodes as a result of stimulation, coating and drug release were characterized. Hematoxylin and eosin staining along with antibodies recognizing Iba1 (microglia/macrophages), NF200 (neuronal axons), NeuN (neurons), vimentin (fibroblasts), caspase-3 (cell death) and L1 (neural cell adhesion molecule) were used. Quantitative image analyses were performed using MATLAB. Main results. Our results indicate that coated microelectrodes have lower in vitro and in vivo impedance values. Significantly less neuronal death/damage was observed with coated electrodes as compared to non-coated controls. The inflammatory response with the PEDOT/CNT-coated electrodes was also reduced. Significance. This study is the first to report on the utility of these coatings in stimulation applications. Our results indicate PEDOT/CNT coatings may be valuable additions to implantable electrodes used as therapeutic modalities. © 2015 IOP Publishing Ltd.