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Spinal cord injury (SCI) induces pathological and inflammatory responses that create an inhibitory environment at the site of trauma, resulting in axonal degeneration and functional disability. Combination therapies targeting multiple aspects of the injury, will likely be more effective than single therapies to facilitate tissue regeneration after SCI. In this study, we designed a dual-delivery system consisting of a neuroprotective drug, minocycline hydrochloride (MH), and a neuroregenerative drug, paclitaxel (PTX), to enhance tissue regeneration in a rat hemisection model of SCI. For this purpose, PTX-encapsulated poly (lactic-co-glycolic acid) PLGA microspheres along with MH were incorporated into the alginate hydrogel. A prolonged and sustained release of MH and PTX from the alginate hydrogel was obtained over eight weeks. The obtained hydrogels loaded with a combination of both drugs or each of them alone, along with the blank hydrogel (devoid of any drugs) were injected into the lesion site after SCI (at the acute phase). Histological assessments showed that the dual-drug treatment reduced inflammation after seven days. Moreover, a decrease in the scar tissue, as well as an increase in neuronal regeneration was observed after 28 days in rats treated with dual-drug delivery system. Over time, a fast and sustained functional improvement was achieved in animals that received dual-drug treatment compared with other experimental groups. This study provides a novel dual-drug delivery system that can be developed to test for a variety of SCI models or neurological disorders.