Integration of neural interfaces with minimal tissue disruption in the brain is ideal to develop robust tools that can address essential neuroscience questions and combat neurological disorders. However, implantation of intracortical devices provokes severe tissue inflammation within the brain, which requires a high metabolic demand to support a complex series of cellular events mediating tissue degeneration and wound healing. Pericytes, peri-vascular cells involved in blood-brain barrier maintenance, vascular permeability, waste clearance, and angiogenesis, have recently been implicated as potential perpetuators of neurodegeneration in brain injury and disease. While the intimate relationship between pericytes and the cortical microvasculature have been explored in other disease states, their behavior following microelectrode implantation, which is responsible for direct blood vessel disruption and dysfunction, is currently unknown. Using two-photon microscopy we observed dynamic changes in the structure and function of pericytes during implantation of a microelectrode array over a 4-week implantation period. Pericytes respond to electrode insertion through transient increases in intracellular calcium and underlying constriction of capillary vessels. Within days following the initial insertion, we observed an influx of new, proliferating pericytes which contribute to new blood vessel formation. Additionally, we discovered a potentially novel population of reactive immune cells in close proximity to the electrode-tissue interface actively engaging in encapsulation of the microelectrode array. Finally, we determined that intracellular pericyte calcium can be modulated by intracortical microstimulation in an amplitude- and frequency-dependent manner. This study provides a new perspective on the complex biological sequelae occurring the electrode-tissue interface and will foster new avenues of potential research consideration and lead to development of more advanced therapeutic interventions towards improving the biocompatibility of neural electrode technology.