Treatments of neurological diseases, diagnostics of brain malfunctions, and the realization of brain-computer interfaces require ultrasmall electrodes that are "invisible" to resident immune cells. Functional electrodes smaller than 50 μm are impossible to produce with traditional materials due to high interfacial impedance at the characteristic frequency of neural activity and insufficient charge storage capacity. The problem can be resolved by using gold nanoparticle nanocomposites. Careful comparison indicates that layer-by-layer assembled films from Au NPs provide more than 3-fold improvement in interfacial impedance and 1 order of magnitude increase in charge storage capacity. Prototypes of microelectrodes could be made using traditional photolithography. Integration of unique nanocomposite materials with microfabrication techniques opens the door for practical realization of the ultrasmall implantable electrodes. Further improvement of electrical properties is expected when using special shapes of gold nanoparticles.