Localized elution of corticosteroids has been used in suppressing inflammation and fibrosis associated with implantation and continuous in vivo residence of bio-medical devices. However, these agents also inhibit endogenous growth factors preventing angiogenesis at the local tissue, interface thereby delaying the healing process and negatively impacting device performance. In this work, a combination of dexamethasone and vascular endothelial growth factor (VEGF) was investigated for concurrent localized delivery using PLGA microsphere/PVA hydrogel composites. Pharmacodynamic effects were evaluated by histopathological examination of subcutaneous tissue surrounding implanted composites using a rat model. The hydrogel composites were capable of simultaneously releasing VEGF and dexamethasone with approximately zero order kinetics. Composites were successful in controlling the implant/tissue interface by suppressing inflammation and fibrosis as well as facilitating neo-angiogenesis at a fraction of their typical oral or i.v. bolus doses. Implants containing VEGF showed a significantly higher number of mature blood vessels at the end of the 4 week study irrespective of the presence of dexamethasone. Thus, localized concurrent elution of VEGF and dexamethasone can overcome the anti-angiogenic effects of the corticosteroid and can be used to engineer inflammation-free and well-vascularized tissue in the vicinity of the implant. These PLGA microsphere/PVA hydrogel composites show promise as coatings for implantable bio-medical devices to improve biocompatibility and ensure in vivo performance.