Spinal cord injury (SCI) initiates a series of sensory, motor, and autonomic dysfunctions induced by the disconnection of the brain-spinal cord axis. In this context, Piezo4Spine PathFinder project (GA 101098597) aims to develop a multifactorial therapy for SCI using biocompatible and biodegradable materials containing nanoparticles loaded with therapeutic agents that will be controlled delivered at the injury site. With this strategy, our purpose is to promote axonal regeneration and connectivity of the brain-spinal cord axis to recover sensory and motor functions. We have designed and analysed the biocompatibility and efficacy of a collagen hydrogel loaded with iron oxide nanoparticles functionalized with chitosan (COL/NPCHI) on cell viability and neuronal connectivity. In vitro, NPCHI exposure do not affect cell viability, number of functional synapses, excitation:inhibition balance or intracellular calcium signalling. In vivo, COL/NPCHI was implanted in a SCI rat model at C6 level to evaluate sensory recovery by electrophysiology and behavioural test. Results show that our biomaterial increases tactile sensitivity and decreases thermal sensitivity below the lesion level, indicating distinct effects on the lenminiscal and spinothalamic sensory ascending pathways. These data are in agreement with results obtained by extracranial recordings where increases in the magnitude of sensory potentials in response to high intensity. In addition, histological analysis reveals a fast in vivo degradation of the collagen-based hydrogel at 120 days post-SCI. Here, we present a biocompatible collagen-hydrogel loaded with NPCHI able to induce changes in the sensory circuitry in vivo after SCI, being promising candidate for further studies and clinical application.