ABSTRACT Despite substantial improvement in microsurgical techniques for nerve repair, recovery after peripheral nerve injury is usually incomplete. FK506, an FDA approved immunosuppressant, improves functional recovery and reinnervation following peripheral nerve injury in animal models. However, systemically delivered FK506 causes undesirable global immunosuppression. We have, therefore, engineered a biodegradable local delivery system for FK506 using fibrin gel as a drug reservoir that could be placed at a site of nerve injury. FK506 was incorporated into fibrin gel in solubilized, particulated, and poly(lactic‐co‐glycolic) acid (PLGA) microspheres‐encapsulated forms. A tunable release of FK506 in the fibrin gel from days to weeks was observed with the rate of release being most rapid for the solubilized form and then the particulate form. The most prolonged period of release was seen with the PLGA microsphere‐encapsulated form. As analyzed by in vitro dorsal root ganglion (DRG) neurite extension assay, PLGA microsphere encapsulation of FK506 did not alter the drug's properties and the released FK506 maintained its bioactivity over the entire period of release. This study suggests that local delivery of FK506 with fibrin hydrogel could be used to enhance peripheral nerve regeneration. Biotechnol. Bioeng. 2015;112: 1948–1953. © 2015 Wiley Periodicals, Inc. Neurite outgrowth of rat's dorsal root ganglion cultured with FK506 release sample from a biocompatible fibrin gel based drug delivery system.