Methylprednisolone (MP) has been shown to reduce acute inflammation resulting from a secondary damage cascade initiated by the primary physical injury to the spinal cord. The current clinical practice for delivering systemic MP is inefficient, and high doses are required, resulting in adverse, undesired, dose-related side effects in patients. Here, we report a novel, minimally invasive, localized drug delivery system for delivering MP to the contused adult rat spinal cord that potentially side-steps the deleterious consequences of systemic cortico-steroid therapy. MP was encapsulated in biodegradable PLGA based nanoparticles (NP), and these nanoparticles were embedded in an agarose hydrogel for localization to the site of contusion injury. To visualize and quantify its spatial distribution within the injured spinal cord, MP was conjugated to Texas-red cadaverine prior to encapsulation in nanoparticles. When delivered via the hydrogel-nanoparticle system, MP entered the injured spinal cord and diffused up to 1.5mm deep and up to 3mm laterally into the injured spinal cord within 2 days. Furthermore, topically delivered MP significantly decreased early inflammation inside the contusion injured spinal cord as evidenced by a significant reduction in the number of ED-1(+) macrophages/activated microglia. This decreased early inflammation was accompanied by a significantly diminished expression of pro-inflammatory proteins including Calpain and iNOS. Additionally, topically delivered MP significantly reduced lesion volume 7 days after contusion injury. The minimally invasive MP delivery system reported in this study has the potential to enhance the effectiveness of MP therapy after contusion injury to the spinal cord and avoid the side effects arising from high dose cortico-steroid therapy.