Ischemic stroke is a leading cause of death and disability worldwide. Potential therapeutics aimed at neural repair and functional recovery are limited in their blood-brain barrier permeability and may exert systemic or off-target effects. We examined the effects of brain-derived neurotrophic factor (BDNF), delivered via an extended release HyStem-C hydrogel implant or vehicle, on sensorimotor function, infarct volume, and neuroinflammation, following permanent distal middle cerebral artery occlusion (dMCAo) in rats. Eight days following dMCAo or sham surgery, treatments were implanted directly into the infarction site. Rats received either vehicle, BDNF-only (0.167 µg/µL), hydrogel-only, hydrogel impregnated with 0.057 µg/µL of BDNF (hydrogel + BDNF), or hydrogel impregnated with 0.167 µg/µL of BDNF (hydrogel + BDNF). The adhesive removal test (ART) and 28-point Neuroscore (28-PN) were used to evaluate sensorimotor function up to two months post-ischemia. The hydrogel + BDNF group showed significant improvements on the ART six to eight weeks following treatment and their behavioral performance was consistently greater on the 28-PN. Infarct volume was reduced in rats treated with hydrogel + BDNF as were levels of microglial, phagocyte, and astrocyte marker immunoexpression in the corpus striatum. These data suggest that targeted intracerebral delivery of BDNF using hydrogels may mitigate ischemic brain injury and restore functional deficits by reducing neuroinflammation.