Background: Implantation of deep brain stimulation (DBS) electrodes is a landmark therapy for movement disorders and some mental conditions. Compared to conventional platinum-iridium (Pt-Ir) electrodes, carbon nanotube yarns (CNTY) electrodes have improved stability and interface characteristics with less distortion during high field strength MRI. Sprague-Dawley rat models were used to examine the in vivo histological and imaging properties of biocompatible CNTY throughout the subacute period. Methods: Sprague-Dawley rats received CNTY (n = 16) or Pt-Ir control (n = 16) electrodes. Behavioral markers, body weight, and survival were recorded. Comparative histology (HE, NeuN, CD68, and GFAP) was performed at 1, 6, and 12 weeks post-implantation; 3.0T MRI was performed at 1 and 12 weeks. Results: Of 32 rats, 30 (15 per group) survived implantation without reduced activity, paralysis, or incapacity to feed. Following implantation, progressive decreases in macrophage activation and neuron-depleted margins surrounding electrodes were observed in both groups. Inflammatory marker expression (CD68) was significantly lower in rats with implanted CNTY electrodes compared to controls at all time points. CNTY electrodes also caused less inflammation and shallower depths of macrophage penetration and neural disruption relative to the interface. Artifacts and distortion were observed on MRI of Pt-Ir but not CNTY electrodes. Conclusions: CNTY electrodes exhibited reduced inflammatory margins compared to Pt-Ir electrodes throughout the subacute period, indicating reduced initial trauma, better overall biocompatibility, and reduced fibrous tissue formation. Coupled with less MRI distortion, CNTY electrodes may be useful alternatives when there is a need to monitor electrode placement by MRI.