The clinical management of neurological disorders remains a major challenge worldwide, constrained by fundamental limitations in both diagnosis and therapy. Electroencephalography (EEG), the cornerstone of neurological assessment, is limited by low spatial resolution and inconsistent signal quality. Therapeutically, the blood-brain barrier (BBB) restricts drug delivery to the brain, resulting in subtherapeutic intracerebral concentrations. These convergent diagnostic and delivery bottlenecks underscore an urgent imperative for innovative materials and technologies. Hydrogels, characterized by biomimetic three-dimensional (3D) architectures, have emerged as a versatile material platform to bridge this gap. From a diagnostic perspective, hydrogels-based electrodes exhibit exceptional biocompatibility and low interfacial impedance, enabling high-fidelity EEG acquisition while minimizing insult to sensitive neural and skin tissues. From a therapeutic perspective, their 3D architecture provides versatile scaffolds for therapeutic agents, supporting high loading efficiency and programmable release profiles for neurological interventions. In this review, we first outline the physicochemical properties and fabrication techniques of hydrogels. We then discuss their applications, with particular emphasis on neural bio-electrodes, brain-computer interfaces (BCIs), drug delivery, and neuro-bioengineering. Finally, we examine the challenges impeding the clinical translation of hydrogels and outline prospective mitigation strategies. The integration of these functionalities is anticipated to advance closed-loop therapeutic systems for the precise management of complex neurological disorders.