One of the major challenges in the field of biomaterials is to develop strategies to regulate the innate host inflammatory response. Coaxial electrospun PCL/PEO hollow fibers containing dexamethasone were evaluated for a local delivery of dexamethasone to reduce adverse inflammation responses often resulting from biomaterial implantation. Core-shell PCL/PEO hollow fibers with a highly porous surface were successfully developed using coaxial electrospinning. The release of dexamethasone exhibited a burst release during the first 0.5-3 h followed by a sustained release over more than 12 days. In vitro study showed that the dexamethasone encapsulated coaxial PCL/PEO hollow fibers significantly reduced cell proliferation of LPS-stimulated macrophages and meanwhile significantly decreased the mRNA expression levels of the pro-inflammatory cytokines TNF-alpha and IL-1 beta. The dexamethasone encapsulated coaxial PCL/PEO hollow microfibers are promising biomaterials for implantation to combat the acute inflammation responses which take place during first 24-48 h after biomaterial implantation and meanwhile to regulate possible hostile chronic inflammations, thus increasing the efficacy and longevity of the implants in vivo.